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Dubai Financial Services Authority (DFSA): Contents

Dubai Financial Services Authority (DFSA)
Laws
Rulebook Modules
Prudential — Insurance Business Module (PIN) [VER15/01-18]
Sourcebook Modules
Consultation Papers
Policy Statements
DFSA Codes of Practice
Amendments to Legislation
Media Releases
Notices
Financial Markets Tribunal
Archive

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  • Prudential — Insurance Business Module (PIN) [VER15/01-18]

    • PIN 1 Application

      • PIN 1.1 Application

        • PIN 1.1.1

          Subject to Rule 1.1.2, this module (PIN) applies to every InsurerG except to the extent that a provision specifies a narrower application.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] DFSA RM48/2007 (Made 1st October 2007). [VER7/10-07]

          • PIN 1.1.1 Guidance

            1. An InsurerG is defined in the GLOG as an Authorised FirmG which is authorised under its LicenceG to carry on in or from the DIFCG , one or more of the Financial ServicesG constituting Insurance BusinessG .
            2. The RulesG in PING apply in relation to all activities of an InsurerG , whether carried on within the DIFCG or elsewhere.

            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
            [Amended] DFSA RM48/2007 (Made 1st October 2007). [VER7/10-07]

        • PIN 1.1.2

          Chapters 2, 3, 4, 6, 7 and 9 do not apply to an InsurerG that is an Authorised ISPVG , unless expressly provided otherwise.

          [Added] DFSA RM48/2007 (Made 1st October 2007). [VER7/10-07]

    • PIN 2 Management and Control of Risk

      • PIN 2.1 Introduction

        • PIN 2.1.1

          This chapter applies to every InsurerG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 2.1.1 Guidance

            1. All Authorised FirmsG are subject to the systems and controls provisions of GEN chapter 5. This chapter expands on the relevant requirements of GENG as those provisions apply in the context of an InsurerG .
            2. PIN App2 contains guidance for InsurersG in respect of specific areas of risk management that are of particular relevance to InsurersG .

            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 2.2 Risk management

        • PIN 2.2.1

          An Insurer'sG risk management systems must:

          (a) be appropriate to the size, business mix and complexity of the Insurer'sG operations;
          (b) address all material risks, financial and non-financial, to which the InsurerG is likely to be exposed;
          (c) describe the relationships between the Insurer'sG risk tolerance limits, its capital requirements, economic capital and the processes and methods for monitoring risk; and
          (d) be supported by adequate risk management policies and procedures which explain the risks covered, the measurement approaches used, and the key assumptions made.
          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] DFSA RM99/2012 (Made 24th July 2012) [VER12/07-12]

        • PIN 2.2.2

          The risk management systems maintained by an InsurerG must include:

          (a) a written risk management strategy approved by senior management, which in the opinion of senior management addresses all material risks to which the InsurerG is likely to be exposed;
          (b) risk management policies and procedures that in the opinion of senior management are adequate to identify, assess, mitigate, control, monitor and report on the material risks to which the InsurerG is exposed; and
          (c) clearly identified managerial responsibilities and controls, designed to ensure that the policies and procedures established for risk management are adhered to at all times.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 2.2.3

          Subject to PIN Rule 2.2.4, where an InsurerG is a member of a GroupG , the InsurerG must take reasonable actions to ensure that the GroupG as a whole complies with the requirements of PIN Rule 2.2.1 and PIN Rule 2.2.2 as though the GroupG as a whole were an InsurerG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 2.2.4

          PIN Rule 2.2.3 does not apply in respect of a GroupG where the InsurerG is not the Holding CompanyG and where the Holding CompanyG of the GroupG is:

          (a) another InsurerG ; or
          (b) a SubsidiaryG of another Holding CompanyG .
          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 2.2.4 Guidance

            1. The effect of PIN Rule 2.2.4 is to avoid duplication arising from complex GroupG structures. If an InsurerG is a member of a GroupG whose Holding CompanyG is another InsurerG , the first InsurerG need not apply PIN Rule 2.2.3 in respect of that GroupG , because the InsurerG that is the Holding CompanyG is already required to apply that RuleG . Where an InsurerG is a member of two or more GroupsG that are also sub-groups of a single GroupG , the InsurerG may consider that single group as a whole for the purposes of this section. An InsurerG that is a Holding CompanyG is however still required to apply PIN Rule 2.2.3 in respect of any GroupG of which the InsurerG is the Holding CompanyG .
            2. An InsurerG should describe how its risk tolerance limits described in PIN Rule 2.2.1(c) link with its corporate objectives, business strategy and current circumstances. An InsurerG is expected to embed its risk tolerance limits into its day-to-day operations and its risk management policies and procedures.
            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
            [Amended] DFSA RM99/2012 (Made 24th July 2012) [VER12/07-12]

      • PIN 2.3 Management of particular risks

        • PIN 2.3.1

          An InsurerG must develop, implement and maintain a risk management system to identify and address balance sheet and market risk, including but not limited to:

          (a) reserving risk;
          (b) investment risk (including risks associated with the use of derivatives);
          (c) underwriting risk;
          (d) claims management risk;
          (e) product design and pricing risk; and
          (f) liquidity management risk.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 2.3.2

          An InsurerG must develop, implement and maintain a risk management system to identify and address credit quality risk.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 2.3.3

          An InsurerG must develop, implement and maintain a risk management system to identify and address the non-financial or operational risk of that InsurerG , including but not limited to:

          (a) technology risk (including processing risks);
          (b) reputational risk;
          (c) fraud and other fiduciary risks;
          (d) compliance risk;
          (e) outsourcing risk;
          (f) business continuity planning risk;
          (g) legal risk; and
          (h) key person risk.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 2.3.4

          An InsurerG must develop, implement and maintain a risk management system to identify and address reinsurance risk. Reinsurance risk refers to risks associated with the Insurer'sG use of reinsurance arrangements as cedant.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 2.3.5

          Without limiting the generality of PIN Rule 2.3.4, an Insurer'sG risk management system in respect of its use of reinsurance arrangements must include the development, implementation and maintenance of a written reinsurance management strategy, appropriate to the size and complexity of the operations of the InsurerG , defining and documenting the Insurer'sG objectives and strategy in respect of reinsurance arrangements.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 2.3.6

          An InsurerG must develop, implement and maintain a risk management system which includes an explicit asset-liability management (ALM) policy, which must clearly specify the nature, role and extent of ALM activities and their relationship with product development, pricing functions and investment management.

          [Added] DFSA RM99/2012 (Made 24th July 2012) [VER12/07-12]

          • PIN 2.3.6 Guidance

            1. An Insurer'sG ALM policy should be appropriate taking into account the nature, scale and complexity of its ALM risks.
            2. The ALM policy should include details as to how:
            (a) the investment and liability strategies adopted by the InsurerG allow for the interaction between assets and liabilities;
            (b) the correlations are taken into account;
            (c) the liability cash flows will be met by cash inflows; and
            (d) the valuations of assets and liabilities will change under an appropriate range of different scenarios.
            [Added] DFSA RM99/2012 (Made 24th July 2012) [VER12/07-12]

      • PIN 2.4 Record-keeping

        • PIN 2.4.1

          An InsurerG must maintain records adequate to enable it to:

          (a) fulfill its obligations under Contracts of InsuranceG effected by it; and
          (b) demonstrate that it complies with the RulesG in PING .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 2.5 Insurers that undertake surety insurance business

        • PIN 2.5.1

          This section applies only to InsurersG that undertake Insurance BusinessG in Class 7(b).

          [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIB 2.5.2

          An InsurerG that undertakes Insurance BusinessG in Class 7(b) must ensure that:

          (a) in any reporting period, the amount of its Gross Written PremiumG attributable to Class 7(b) does not exceed 5% of its total Gross Written PremiumG in all classes of non-life insurance;
          (b) the PersonG insured under any Contract of InsuranceG in Class 7(b) is:
          (i) a Body CorporateG ; or
          (ii) if not a Body CorporateG , a Financial InstitutionG ;
          (c) at the time of effecting a Contract of InsuranceG in Class 7(b), the Person insured under that contract has a rating of BBB or better; and
          (d) the maximum period of any Contract of InsuranceG in Class 7(b) does not exceed twenty years.
          [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 2.5.3

          PIN Rule 4.1.4 applies in respect of determination of ratings for the purposes of PIN Rule 2.5.2(c).

          [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 2.5.4

          An InsurerG that is a Protected Cell CompanyG that undertakes Insurance BusinessG in Class 7(b) must comply with PIN Rule 2.5.2 in respect of each CellG to which such business is attributable.

          [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 2.5.5

          (1) An InsurerG intending to undertake Insurance BusinessG in Class 7(b) must:
          (a) notify the DFSAG in writing of its proposal to undertake such business; and
          (b) give to the DFSAG a business plan for the business intended to be undertaken.
          (2) The DFSAG may object to a proposal made by an InsurerG under (1).
          (3) The procedures in Schedule 3 to the Regulatory LawG apply to a decision of the DFSAG under (2).
          (4) If the DFSAG decides to exercise its power under (2), the Insurer may refer the matter to the FMTG for review.
          (5) An InsurerG must not effect any contract of insurance in Class 7(b) if the DFSAG has objected to a proposal it has made under (1).
          [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]
          [Amended] DFSA RM136/2014 (Made 21st August 2014). [VER14/06-14]

          • PIN 2.5.5 Guidance

            1. If all the information required is provided to the DFSAG relating to the proposal to effect Contracts of InsuranceG in Class 7(b), generally, it will take about 45 days for the DFSAG to be able to determine whether an InsurerG should be allowed to conduct this type of business. An InsurerG may commence a reference to the FMTG in relation to a decision of the DFSAG to object to a proposal.
            2. The current requirements relating to Class 7(b) do not cater to monoline specialist financial guarantee insurers. However, if such an InsurerG wishes to operate in the DIFCG , the DFSAG will consider what requirements should apply to it. In doing so, the DFSAG will consider capital adequacy and other requirements that are generally applied to such specialist InsurersG in other jurisdictions.
            [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]
            [Amended] DFSA RM136/2014 (Made 21st August 2014). [VER14/06-14]

    • PIN 3 Long-Term Insurance Business

      • PIN 3.1 Introduction

        • PIN 3.1.1

          This chapter applies to all InsurersG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 3.1.1 Guidance

            1.  This chapter sets out requirements in respect of Long-Term Insurance BusinessG . An InsurerG is required to maintain a separate fund in respect of Long-Term Insurance BusinessG or to subject itself to the same restrictions as apply to a Long-Term Insurance FundG .
            2.  Requirements in this section that are not specified as applying to Direct Long-Term Insurance BusinessG apply to all Long-Term Insurance BusinessG .

            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
            [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]
            [Amended] DFSA RM56/2008 (Made 1st July 2008). [VER10/07-08]

      • PIN 3.2 Establishment of long-term insurance funds

        • PIN 3.2.1

          An InsurerG that is required, under the provisions of PIN section 3.3, to establish or maintain a Long-Term Insurance FundG in respect of a part of its business must identify separately in its books and records the assets, liabilities, revenues and expenses attributable to that business. Those assets, liabilities, revenues and expenses must be recorded separately and accounted for as a Long-Term Insurance FundG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 3.2.2

          Where an InsurerG that is not a Protected Cell CompanyG carries on Long-Term Insurance BusinessG that, under the provisions of PIN section 3.3, must be attributed to a Long-Term Insurance FundG , it must either:

          (a) establish one or more Long-Term Insurance FundsG ; or
          (b) notify the DFSAG in writing that the InsurerG is deemed to constitute a single Long-Term Insurance FundG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 3.2.3

          When an InsurerG that is a Protected Cell CompanyG carries on, through a CellG , Long-Term Insurance BusinessG that, under the provisions of PIN section 3.3, must be attributed to a Long-Term Insurance FundG , it must either:

          (a) establish, in respect of that CellG , one or more Long-Term Insurance FundsG ; or
          (b) notify the DFSAG in writing that the CellG is deemed to constitute a single Long-Term Insurance FundG .
          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 3.2.3 Guidance

            Because of the prohibition set out in COB part 1, Insurance BusinessG of an InsurerG that is a Protected Cell CompanyG can only be carried out through its CellsG .


            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
            [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 3.2.4

          An InsurerG that is subject to a regulatory requirement in another jurisdiction to arrange its affairs or any part of its affairs in a manner that is equivalent or substantially equivalent to the maintenance of a Long-Term Insurance FundG required by this section, may make a written application to the DFSAG for that arrangement of its affairs or that part of its affairs to be deemed for the purposes of these RulesG to constitute a Long-Term Insurance FundG . If the DFSAG approves that application, it must inform the InsurerG in writing, and must state in its notice to the InsurerG the manner in which the arrangement will be deemed for the purpose of these RulesG to constitute a Long-Term Insurance FundG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 3.2.5

          An InsurerG , or a CellG of an InsurerG , that is deemed in accordance with PIN Rule 3.2.2(b) or PIN Rule 3.2.3(b) to constitute a single Long-Term Insurance FundG , shall be treated for all purposes relating to these RulesG as though the InsurerG had established a Long-Term Insurance FundG to which all of the assets and liabilities of the InsurerG or of the CellG are attributed.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 3.2.6

          Notwithstanding anything to the contrary contained in the above provisions, the DFSAG may, at its sole discretion, direct that an InsurerG which conducts Long-Term Insurance BusinessG establish one or more Long-Term Insurance FundsG in respect of its Long-Term Insurance BusinessG or any part of such business. An InsurerG shall establish one or more Long-Term Insurance FundsG where so directed by the DFSAG .

          [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]
          [Amended] DFSA RM50/2007 (Made 1st October 2007). [VER7/10-07]

      • PIN 3.3 Attribution of contracts to a fund

        • PIN 3.3.1

          All contracts of Long-Term InsuranceG effected by a DIFC Incorporated InsurerG must be attributed to a Long-Term Insurance FundG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 3.3.2

          All contracts of Long-Term InsuranceG effected by an InsurerG that is not a DIFC Incorporated InsurerG through an establishment in the DIFCG must be attributed to a Long-Term Insurance FundG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 3.3.3

          Except as allowed in PIN Rule 3.3.4, an InsurerG may not attribute General InsuranceG contracts to a Long-Term Insurance FundG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 3.3.4

          An InsurerG may attribute insurance contracts in General InsuranceG ClassG 1 or ClassG 2 to a Long-Term Insurance FundG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 3.4 Segregation of assets and liabilities

        • PIN 3.4.1

          All assets, liabilities, revenues and expenses in respect of a Contract of InsuranceG that is attributed to a Long-Term Insurance FundG must be recorded as assets, liabilities, revenues and expenses of that Long-Term Insurance FundG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 3.4.2

          An InsurerG may at any time attribute any of its assets to a Long-Term Insurance FundG that were not previously attributed to such a Long-Term Insurance FundG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 3.4.2 Guidance

            A transaction described in PIN Rule 3.4.2 is sometimes described as a transfer of capital into the Long-Term Insurance FundG .


            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 3.4.3

          All revenues and expenses arising by way of earnings, revaluation or other change to the assets and liabilities of a Long-Term Insurance FundG must be recorded as revenues and expenses, or movements in capital, of that Long-Term Insurance FundG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 3.4.4

          An InsurerG which is required to maintain a Long-Term Insurance FundG must maintain adequate accounting and other records to identify the contracts and the assets, liabilities, revenues and expenses attributable to the Long-Term Insurance FundG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 3.5 Limitation on use of assets in long-term insurance fund

        • PIN 3.5.1

          Except as provided in this section, assets that are attributable to a Long-Term Insurance FundG must be applied only for the purposes of the business attributed to the Long-Term Insurance FundG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 3.5.2

          Assets attributable to a Long-Term Insurance FundG may not be transferred so as to be available for other purposes of the InsurerG except:

          (a) where the transfer constitutes appropriation of a surplus determined in accordance with PIN section 7.3, provided that the transfer is performed within four months of the Reference DateG of the actuarial investigation referred to in that RuleG ;
          (b) where the transfer constitutes a payment of dividend or return of capital, in accordance with Rules PIN 3.5.3 and PIN 3.5.4;
          (c) where the transfer is made in exchange for other assets at fair value;
          (d) where the transfer constitutes reimbursement of expenditure borne on behalf of the Long-Term Insurance FundG , and in respect of expenses attributable to the Long-Term Insurance FundG ; or
          (e) where the transfer constitutes reattribution of assets attributed to the Long-Term Insurance FundG in error.
          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 3.5.3

          Assets attributable to a Long-Term Insurance FundG must not be distributed by way of dividend or by way of return of capital, except by an InsurerG or a CellG that is deemed to constitute a single Long-Term Insurance FundG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 3.5.4

          A dividend or return of capital by an InsurerG or a CellG that is deemed to constitute a single Long-Term Insurance FundG may only be made where the dividend or return of capital constitutes appropriation of a surplus determined in accordance with PIN section 7.3, and:

          (a) if the payment is made within four months of the Reference DateG of the actuarial investigation determining that surplus, the payment does not cause the total aggregate amount of the dividends or returns of capital made by the InsurerG or the CellG since that Reference DateG to exceed the amount of that surplus; or
          (b) If the payment is made more than four months after the Reference DateG of the actuarial investigation determining that surplus, the payment does not cause the total aggregate amount of the dividends or returns of capital made by the InsurerG or the CellG since that Reference DateG to exceed 50 per cent of the amount of that surplus.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 3.5.5

          Assets attributable to a Long-Term Insurance FundG must not be lent or otherwise made available for use for any other purposes of the InsurerG or any purposes of any party RelatedG to the InsurerG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 3.5.5 Guidance

            PIN Rule 3.5.5 operates to prohibit, among other things, lending between Long-Term Insurance FundsG of the same InsurerG . Assets must not be organised in such a manner as to create indebtedness between Long-Term Insurance FundsG .

            [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 3.5.6

          An InsurerG may not enter into any arrangement, whether or not described as a contract of reinsurance, whereby a Long-Term Insurance FundG of the InsurerG stands in the same relation to the InsurerG as though the InsurerG were the reinsurer in a contract of reinsurance in which the Long-Term Insurance FundG is the cedant.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 3.5.6 Guidance

            PIN Rule 3.5.6 operates to prohibit reinsurance between Long Term Insurance FundsG of the same InsurerG , as well as arrangements of the nature of internal contracts of reinsurance where the cession transaction is attributed to a Long-Term Insurance FundG but the corresponding reinsurance acceptance transaction is not.


            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 3.6 Other requirements

        • PIN 3.6.1

          (1) Except as permitted in this RuleG , a DIFC Incorporated InsurerG must not effect any Direct Long-Term InsuranceG contract the terms of which include any of the following:
          (a) investment components of Policy BenefitsG , that are wholly or partly guaranteed;
          (b) options to receive Policy BenefitsG on expiry, maturity or surrender as annuities, where annuity rates are wholly or partly guaranteed at the inception of the contract;
          (c) bonuses on participating contracts where those bonuses become vested Policy BenefitsG or guaranteed by the Insurer at a date prior to expiry, maturity or surrender; or
          (d) other options or discretionary Policy BenefitsG that expose the Insurer to investment, expense or other risk that is not readily definable at the inception of the contract.
          (2) An InsurerG may request the permission of the DFSAG to effect Direct Long-Term InsuranceG contracts with features of the kind referred to in (1). A request must be made in writing and must include:
          (a) details of the terms of the proposed contracts;
          (b) an explanation of how the InsurerG intends to price such contracts, and to value them for the purposes of its capital adequacy calculations; and
          (c) an explanation of how the InsurerG intends to quantify, monitor and manage the risks to its capital adequacy represented by such features of contracts.
          (3) The DFSAG may give an InsurerG permission to effect Direct Long-Term InsuranceG contracts having one or more features of the kind referred to in (1). Permission shall be given in writing and shall be subject to such terms or conditions as the DFSAG may specify in its notice giving permission. Where any terms and conditions are imposed on the InsurerG , the InsurerG shall comply with such terms and conditions.
          (4) The DFSAG may on its own initiative at any time vary or revoke permission given under (3) above. Variation or revocation shall be communicated to the InsurerG in writing.
          (5) The procedures in Schedule 3 to the Regulatory LawG apply to a decision of the DFSAG under this Rule not to give permission or to impose conditions or restrictions or to vary or revoke permission.
          (6) If the DFSAG decides to exercise its power under this Rule not to give permission or to impose conditions or restrictions or to vary or revoke permission, the Insurer may refer the matter to the FMTG for review.
          [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]
          [Amended] DFSA RM136/2014 (Made 21st August 2014). [VER14/06-14]

          • PIN 3.6.1 Guidance

            1. The features described in PIN Rule 3.6.1(1) have the potential to expose an Insurer to risks that are not adequately provided for in the capital adequacy framework set out in this RulebookG . The DFSAG retains the power to prohibit or limit the inclusion of such features in a Long-Term InsuranceG contract where it is of the view that the inclusion of such features may have a materially adverse impact upon the long term viability of the InsurerG . It is natural for InsurersG to seek to stimulate a market by offering features such as guarantees or options. However, the solvency of InsurersG could be threatened if they have not adequately valued, stress-tested and set aside adequate capital to service such features. Therefore, the DFSAG will expect InsurersG seeking permission to write contracts with such features to demonstrate that these steps have been undertaken, and that their procedures provide adequately for ongoing monitoring of the associated risks. Permission to undertake such business may be subject to conditions, for example, a requirement to maintain additional capital, or to restrict business of this nature by reference to total business. The DFSAG may also as a condition of granting permission require additional information relating to the business in question to be reported to the DFSAG in the Insurer'sG periodic regulatory returns, or in the Actuary'sG report referred to in PIN Rule 7.3.4.
            2. If all the information required is provided to the DFSAG relating to a request for permission under PIN Rule 3.6.2, generally, it will take about 45 days for the DFSAG to be able to determine whether an InsurerG should be permitted to effect Direct Long-Term InsuranceG contracts with features of the kind referred to in that RuleG .
            [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]
            [Amended] DFSA RM136/2014 (Made 21st August 2014). [VER14/06-14]

        • PIN 3.6.2

          A DIFC Incorporated InsurerG which undertakes Direct Long-Term Insurance BusinessG must supervise adequately the conduct of its Direct Long-Term Insurance BusinessG in each jurisdiction in which that business is undertaken.

          [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

          • PIN 3.6.2 Guidance

            1. In order to demonstrate compliance with PIN Rule 3.6.2, the senior management of a DIFC Incorporated InsurerG should have mechanisms in place such that adequate information, in appropriate detail, is reported internally to senior management on a timely basis, and that this information is appropriately considered and acted upon.
            2. In discharging its responsibilities under PIN Rule 3.6.2, and under the high level requirements to which it is subject under GEN Rule 5.3.1, senior management will need to consider specific risks to which the Insurer is exposed as a consequence of its activity within each jurisdiction. Internal governance procedures such as Internal AuditG should include examination of non-DIFC activities. Compliance procedures should be designed to ensure that the Insurer complies with any domestic regulation to which it may be subject in the jurisdiction in which it is doing business. InsurersG are also expected to ensure that conduct of business by them in other jurisdictions does not pose any risk to the reputation of the DIFCG . Consequently, senior management should ensure that adequate standards of customer protection are adopted by the Insurer'sG operation in each jurisdiction. Senior management should have regard to the provisions of GEN section 4.2 and in particular Principles 6, 7, 8 and 9 in considering whether standards of consumer protection are adequate. Review of persistency statistics may assist in identifying problems in the area of conduct of business.
            3. PIN Rule 3.6.2 does not preclude the establishment of appropriate local management structures with responsibility for the Insurer'sG business in the jurisdiction in question. However, the overall responsibility for ensuring compliance with domestic and DIFCG regimes rests with the senior management of the InsurerG .
            [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

    • PIN 4 Capital Adequacy

      • PIN 4.1 Introduction

        • PIN 4.1.1

          This chapter applies to all InsurersG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 4.1.1 Guidance

            1. The amount of capital is fundamental to the financial health of any insurance undertaking and therefore to the protection of its policyholders. All InsurersG are therefore required to maintain a minimum level of capital resources in accordance with this chapter.
            2. This chapter establishes minimum required levels of capital resources applicable to InsurersG of different types. PIN section 4.2 establishes provisions that are applicable to all InsurersG , wherever they are incorporated and of whatever type they are. PIN section 4.3 establishes Minimum Capital RequirementsG in respect of InsurersG other than Protected Cell CompaniesG , and PIN section 4.4 establishes equivalent requirements in respect of Protected Cell CompaniesG . Additional provisions are established by PIN section 4.6, in respect of InsurersG maintaining Long-Term Insurance FundsG , and by PIN section 4.7, in respect of InsurersG that are not DIFC Incorporated InsurersG .
            3. The DFSAG has the power under the Regulatory LawG 2004 to act if it believes that any requirement of this chapter is breached, or that it may be breached in the future.

            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
            [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 4.1.2

          For the purposes of this chapter, assets and liabilities must be valued in accordance with PIN chapter 5.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 4.1.3

          In this chapter and in the appendices referred to in this chapter, references to ratings are made according to the rating hierarchy (AAA, AA, etc) of Standard & Poor's. Where, for the purposes of a provision of this chapter or of an appendix, an InsurerG uses ratings from a Rating AgencyG other than Standard & Poor's, the InsurerG must apply that provision as though the Standard & Poor's rating referred to in the provision were replaced by the rating from that other Rating AgencyG that is equivalent to the Standard & Poor's rating.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 4.1.4

          An InsurerG must not, for the purposes of this chapter or the appendices referred to in this chapter, use ratings provided by any Rating AgencyG other than Standard & Poor's, Moody's, AM Best, and Fitch Ratings, except where the DFSAG has given written approval to the InsurerG for the use of ratings provided by that other Rating AgencyG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 4.2 Basic requirement

        • PIN 4.2.1

          This section applies to all InsurersG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 4.2.2

          An InsurerG must always have capital resources that are, in the opinion of its directors formed on reasonable assumptions, adequate for the conduct of its business, taking into consideration the size of the InsurerG and the mix and complexity of its business.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 4.2.2 Guidance

            1. Where an InsurerG effects Direct Long-Term InsuranceG contracts, PIN Rule 4.2.2 implies that the InsurerG must also be able to fund and service its Long-Term Insurance BusinessG in the long term.
            2. To be able to demonstrate to the DFSAG that the InsurerG meets the obligation of PIN Rule 4.2.2 on an on-going basis, the DFSAG expects the InsurerG to develop internal capital models to support the self-assessment of capital adequacy. Those internal capital models should include mechanisms to estimate in a realistic manner the impact on the Insurer'sG capital position of possible scenarios relevant to the Insurer'sG business. The results of scenario testing should be communicated to the appropriate levels of management within the InsurerG . InsurersG should be able to demonstrate to the DFSAG that the InsurerG has adequate capital resources to withstand external and internal shocks to which they may plausibly be exposed.
            3. Compliance with quantitative capital requirements set out in the PIN Module does not guarantee compliance with PIN Rule 4.2.2.
            [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 4.2.3

          (1) Without limiting the generality of PIN Rule 4.2.2, an InsurerG that effects Direct Long-Term InsuranceG contracts must ensure that:
          (a) premiums for any Direct Long-Term InsuranceG contracts it effects are sufficient at that time for the formation of technical provisions relating to future Policy BenefitsG in accordance with the applicable valuation rules; and
          (b) each Long-Term Insurance FundG to which Direct Long-Term InsuranceG contracts are attributed holds at all times Invested AssetsG of appropriate safety, yield and marketability adequate to provide the future Policy BenefitsG under those contracts that are attributed to the FundG .
          (2) For the purposes of (1)(b), assets of the type described in PIN Rule A3.4.3 must be excluded.
          [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

          • PIN 4.2.3 Guidance

            1. PIN Rule 4.2.3(1)(a) applies at the time that a contract is effected. Circumstances may arise in which premiums subsequently prove to be inadequate. However, this does not create a breach of the requirement in that subparagraph. Neither does the fact that an individual contract might suffer a large loss.
            2. An InsurerG should be able to demonstrate that its procedures allow for prior assessment and periodic review of premium adequacy of Direct Long-Term InsuranceG contracts that it writes. The assessment will consider the adequacy of premiums taking into account projected revenues and expenses in respect of the relevant contracts, including the likely impact of any discretionary features. In making this assessment, credit should not be taken for the impact of voluntary discontinuance (lapse, surrender of or making the contract paid-up) by the policyholder. The DFSAG does not consider it appropriate for the projected profitability of Direct Long-Term InsuranceG contracts to be dependent on 'lapse support'.
            3. PIN Rule 4.2.3(1)(a) generally prevents an Insurer from writing 'loss leader' Direct Long-Term InsuranceG products. An InsurerG that wishes to conduct business on a loss-leader basis would need to apply for an appropriate waiver. Such an InsurerG would need to demonstrate that its resources are adequate to cover an appropriate level of technical provisions in respect of the contracts concerned, without detriment to its ability to comply with this RuleG in respect of its other business.
            [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 4.2.4

          Systems and controls maintained by directors for the purposes of PIN Rule 4.2.2 and PIN Rule 4.2.3 must include analysis of realistic scenarios relevant to the circumstances of the InsurerG and the effects that the occurrences of those scenarios would have on the capital requirements of the InsurerG and on its capital resources.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]

          • PIN 4.2.4 Guidance

            Because an InsurerG is required to maintain adequate capital resources at all times, its systems and controls need to enable the directors to determine and monitor the capital requirements of the InsurerG and the capital resources that it has available, and to identify occurrences where the capital resources fall short of the capital requirements or may fall short in the future. An InsurerG is not required to measure the precise amount of its capital resources and its capital requirements on a daily basis. However an InsurerG should be in a position to demonstrate its capital adequacy at any time if asked to do so by the DFSAG .


            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
            [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]

      • PIN 4.3 Minimum capital requirement for insurers that are not protected cell companies

        • PIN 4.3.1

          This section applies only to InsurersG that are not Protected Cell CompaniesG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 4.3.2

          An InsurerG that is not a Protected Cell CompanyG must always have Adjusted Capital ResourcesG equal to or higher than the amount of its Minimum Capital RequirementG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 4.3.3

          An Insurer'sG Adjusted Capital ResourcesG must be calculated in accordance with PIN App3.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 4.3.4

          An Insurer'sG Minimum Capital RequirementG must be calculated in accordance with PIN App4.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 4.4 Minimum capital requirement for insurers that are protected cell companies

        • PIN 4.4.1

          This section applies only to InsurersG that are Protected Cell CompaniesG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 4.4.2

          An InsurerG that is a Protected Cell CompanyG must ensure that at all times the InsurerG has Adjusted Non-Cellular Capital ResourcesG equal to or higher than the amount of the Minimum Non-Cellular Capital RequirementG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 4.4.3

          An InsurerG that is a Protected Cell CompanyG must ensure that at all times, in respect of each of its CellsG , the InsurerG has Adjusted Cellular Capital ResourcesG equal to or higher than the amount of the Minimum Cellular Capital RequirementG in respect of that CellG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 4.4.4

          The Adjusted Non-Cellular Capital ResourcesG in respect of an InsurerG that is a Protected Cell CompanyG must be calculated in accordance with PIN App5.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 4.4.5

          The Minimum Non-Cellular Capital RequirementG in respect of an InsurerG that is a Protected Cell CompanyG must be calculated in accordance with PIN App6.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 4.4.6

          The Adjusted Cellular Capital ResourcesG in respect of a CellG must be calculated in accordance with PIN App5.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 4.4.7

          The Minimum Cellular Capital RequirementG in respect of a CellG must be calculated in accordance with PIN App6.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 4.5 [Deleted]

        [Deleted] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • The content selected is no longer in force and cannot be presented in Whole Section view.

      • PIN 4.6 Insurers that undertake long-term insurance business

        • PIN 4.6.1

          Subject to PIN Rule 4.6.2, this section applies only to InsurersG that undertake Long-Term Insurance BusinessG through a Long-Term Insurance FundG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 4.6.2

          This section does not apply to either:

          (a) an InsurerG that is deemed to constitute a single Long-Term Insurance FundG in accordance with PIN Rule 3.2.2(b); or
          (b) an InsurerG that is a Protected Cell CompanyG in respect of a CellG that is deemed to constitute a single Long-Term Insurance FundG in accordance with PIN Rule 3.2.3(b).

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 4.6.3

          An InsurerG that undertakes Long-Term Insurance BusinessG through a Long-Term Insurance FundG must ensure that at all times, in respect of each Long-Term Insurance FundG maintained by it, the InsurerG has Adjusted Fund Capital ResourcesG equal to or higher than the amount of the Minimum Fund Capital RequirementG in respect of that Long-Term Insurance FundG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 4.6.4

          The Adjusted Fund Capital ResourcesG in respect of a Long-Term Insurance FundG maintained by an InsurerG must be calculated in accordance with PIN App7.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 4.6.5

          The Minimum Fund Capital RequirementG in respect of a Long-Term Insurance FundG maintained by an InsurerG must be calculated in accordance with PIN App8.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 4.7 Availability of assets of insurers incorporated outside the DIFC

        • PIN 4.7.1

          This section applies only to InsurersG that are not DIFC Incorporated InsurersG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 4.7.1 Guidance

            The provisions in this section require an InsurerG to have assets, of a minimum quality, available to meet its gross Insurance LiabilitiesG arising from its DIFCG Insurance BusinessG plus a margin. Although the InsurerG is required to cover its Insurance LiabilitiesG gross of reinsurance, an InsurerG still has benefit of its reinsurance arrangements because assets may include amounts receivable from reinsurers in respect of gross Insurance LiabilitiesG , including amounts potentially receivable from reinsurers in respect of the exposures reflected in the Insurer'sG Premium LiabilityG . No credit, however, may be taken in respect of a reinsurer that is RatedG worse than BBB.


            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 4.7.2

          An InsurerG that is not a DIFC Incorporated InsurerG must always have assets, of a type referred to in PIN Rule 4.7.3, that are available to meet Insurance LiabilitiesG of the InsurerG arising in respect of operations conducted by the InsurerG in the DIFCG , at least equal to the sum of the following:

          (a) the sum of the default risk component and the investment volatility risk component in respect of those assets, calculated according to the methods set out in sections PIN A4.4 and PIN A4.5 respectively, applying those methods so far as concerns those assets only;
          (b) Insurance LiabilitiesG of the InsurerG in respect of its DIFCG Insurance BusinessG ; and
          (c) the Insurer'sG DIFC Business Risk Capital RequirementG , calculated in accordance with PIN App9.
          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]

          • PIN 4.7.2 Guidance

            1. Assets are not normally available to meet Insurance LiabilitiesG of an InsurerG arising in respect of operations conducted by the InsurerG in the DIFCG , if those assets are required to meet liabilities of the InsurerG in jurisdictions other than the DIFCG , except where those liabilities are also Insurance LiabilitiesG of the InsurerG arising in respect of operations conducted by the InsurerG in the DIFCG .
            2. Assets are not normally available to meet Insurance LiabilitiesG of an InsurerG arising in respect of operations conducted by the InsurerG in the DIFCG , if those assets are required, under the laws of any jurisdiction, to be located in a jurisdiction other than the DIFCG , except where the assets are required to be located in that jurisdiction to meet, or as collateral against, either:
            a. liabilities that are Insurance LiabilitiesG of the InsurerG arising in respect of operations conducted by the InsurerG in the DIFCG ; or
            b. liabilities that may arise in the future and that would, if they arose, be Insurance LiabilitiesG of the InsurerG arising in respect of operations conducted by the InsurerG in the DIFCG .

            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 4.7.3

          The assets available to an InsurerG for the purposes of PIN Rule 4.7.2 may comprise any combination of the following types of asset:

          (a) bonds RatedG 'BBB' or better;
          (b) equities listed on an Approved Stock ExchangeG ;
          (c) reinsurance recoverable in respect of General Insurance LiabilitiesG referred to in PIN Rule 4.7.2(b), where the reinsurer is RatedG 'BBB' or better; and
          (d) land and buildings.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 4.7.4

          An InsurerG subject to this section must demonstrate to the satisfaction of the DFSAG that the InsurerG complies with PIN Rule 4.7.2, when the DFSAG requests it by written notice to do so.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 4.8 Failure to comply with this chapter

        • PIN 4.8.1

          An InsurerG that becomes aware that it does not comply with this chapter:

          (a) must immediately notify the DFSAG in writing;
          (b) must not effect any Contracts of InsuranceG through an establishment in the DIFCG until the DFSAG has given it written permission to recommence business;
          (c) must not, if the InsurerG is a DIFC Incorporated InsurerG , effect any Contracts of InsuranceG until the DFSAG has given it written permission to recommence business; and
          (d) must not make any distribution of profits or surplus however called or described, or return of capital, without the written permission of the DFSAG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 4.8.2

          An InsurerG that believes that it may not be in compliance with this chapter or may not continue to comply with this chapter in the future must immediately provide the DFSAG with a written statement of:

          (a) the reasons for the Insurer'sG belief that it may not be in compliance or may not continue to comply; and
          (b) the action that the InsurerG is taking to avoid non-compliance.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 4.8.3

          An InsurerG to which PIN Rule 4.8.2 applies must not make any distribution of profits or surplus, however called or described, or return of capital without the written permission of the DFSAG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 4.8.3 Guidance

            In dealing with non-compliance, or possible non-compliance, with this chapter, the DFSA'sG primary concern will be the interests of policyholders, both existing and prospective. It recognises that there will be circumstances in which a problem may be resolved quickly, for example by support from a parent company, without jeopardising the interests of policyholders. In such circumstances, it will be in the interests of all parties for there to be minimum disruption to the Insurer'sG business. The DFSA'sG normal approach will be to seek to work cooperatively with firms to deal with any problems. There will, however, be other circumstances in which it is necessary to take firm action to avoid exposing further policyholders to the risk of the Insurer'sG failure, and the DFSAG will not hesitate to do so.


            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 4.9 Limitations on distributions by insurers

        • PIN 4.9.1

          No InsurerG may make any distribution of profits or surplus, however called or described, or return of capital if such distribution or return would cause the InsurerG to fail to comply with any provision of this chapter.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

    • PIN 5 Measurement of Assets and Liabilities of Insurers

      • PIN 5.1 General provisions

        • PIN 5.1.1

          This chapter applies to an InsurerG in relation to ReturnsG made to the DFSAG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 5.1.1 Guidance

            1. This chapter establishes a set of principles for the consistent measurement of the assets and liabilities of InsurersG for the purposes of reporting under PIN chapter 6 and for determining compliance with PIN chapter 4.
            2. This chapter is not intended to establish a basis of accounting for general purpose financial statements of InsurersG . This chapter does not prevent InsurersG from adopting measurements of assets and liabilities that might be considered excessively prudent if adopted in the Insurer'sG general purpose financial statements. InsurersG are not however expected to mislead the DFSAG as to the financial position or financial performance of the InsurerG .

            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 5.1.2

          Subject to Rules PIN 5.1.3, PIN 5.1.4, PIN 5.1.5 and PIN 5.1.6, an InsurerG must recognise and measure its assets and liabilities in accordance with so many of sections PIN 5.3, PIN 5.4, PIN 5.5 and PIN 5.6 as apply to the InsurerG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 5.1.3

          An InsurerG may measure the value of an asset at less than the value determined in accordance with this chapter.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 5.1.4

          An InsurerG may measure the value of a liability at more than the value determined in accordance with this chapter.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 5.1.5

          An InsurerG may use approximate methods to measure an asset or a liability, where the result obtained by the use of that approximate method would not be materially different from the result obtained by applying a measurement method prescribed in this chapter.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 5.1.6

          Notwithstanding any other provision of this chapter, the DFSAG may, by written notice, direct an InsurerG to measure an asset or a liability in accordance with principles specified by the DFSAG in that written notice.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 5.2 Classification of insurance business

        • PIN 5.2.1

          An InsurerG must, in its own records, classify all insurance contracts effected by it as InsurerG and all reinsurance contracts entered into by it as cedant, according to the Class of BusinessG to which the contracts relate.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 5.2.2

          Where a contract relates to more than one Class of BusinessG , the InsurerG must record separately the portions of the contract that relate to each Class of BusinessG , except that immaterial portions need not be separately recorded.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 5.2.2 Guidance

            1. The Classes of BusinessG are set out in GEN App4.
            2. A portion of a Contract of InsuranceG , insuring a risk of a Class of BusinessG other than the principal Class of BusinessG to which the contract relates, will not normally be regarded as material if the interest that it insures is both related and subsidiary to the principal interest or interests insured under the contract, and constitutes less than ten per cent of the Gross Written PremiumG under the contract.

            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 5.3 Basic principles of recognition and measurement

        • PIN 5.3.1

          Except where this chapter provides otherwise, the assets and liabilities of an InsurerG must be recognised in accordance with a basis of accounting set out in PIN Rule 5.3.2, and the values attributed to those assets and liabilities must be measured in accordance with that basis of accounting.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 5.3.1 Guidance

            The exceptions provided in this chapter relate to the following:

            a. specific RulesG in respect of certain assets and liabilities, intended to achieve a regulatory objective not achieved by application of either or both of the bases of accounting set out in PIN Rule 5.3.2;
            b. assets and liabilities that are not dealt with in either or both of the bases of accounting set out in PIN Rule 5.3.2; and
            c. the overriding power of the DFSAG , set out in PIN Rule 5.1.6, to require an InsurerG to adopt a particular measurement for a specific asset or liability.

            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 5.3.2

          The basis of accounting adopted by an InsurerG for the purposes of PIN Rule 5.3.1 must be:

          (a) in the case of a Takaful InsurerG , the standards of the Accounting and Auditing Organisation for Islamic Financial Institutions; or
          (b) in any other case, International Financial Reporting Standards.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 5.3.3

          Where the valuation of an asset or liability is dependent upon the adoption of assumptions or the adoption of a calculation method, any change in the assumptions or methods adopted must be reflected immediately in the value attributed to the asset or liability concerned. The recognition of the effects of changes in assumptions or methods may not be deferred to future reporting periods.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 5.4 Recognition and measurement of insurance assets and liabilities in respect of general insurance

        • PIN 5.4.1

          This section applies to assets and liabilities in respect of General InsuranceG contracts.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 5.4.2

          Premiums in respect of direct insurance contracts, facultative reinsurance contracts and non-proportional treaty reinsurance contracts entered into by an InsurerG as insurer must be treated as receivable from the date of entering into the insurance contract.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 5.4.3

          Premiums in respect of proportional treaty reinsurance contracts entered into by an InsurerG as insurer must be treated as receivable in accordance with the pattern of the cedant entering into the underlying insurance contracts.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 5.4.4

          Premiums in respect of facultative reinsurance contracts and non-proportional treaty contracts entered into by an InsurerG as cedant must be treated as payable from the date of entering into the reinsurance contract.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 5.4.5

          Premiums in respect of proportional treaty reinsurance contracts entered into by an InsurerG as cedant must be treated as payable in accordance with the pattern of effecting the underlying insurance contracts.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 5.4.6

          Expenses incurred in respect of insurance contracts effected by an InsurerG must be treated as payable at the time the contracts are effected.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 5.4.7

          An InsurerG must treat as a liability, the premium liability, which is the value of future claim payments and associated direct and indirect settlement costs, arising from future events insured under policies that are in force as at the Solvency Reference DateG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 5.4.7 Guidance

            The liability referred to in PIN Rule 5.4.7 is commonly represented by insurers as two separate provisions, the unearned premium provision and the premium deficiency provision. The sum of the two provisions is sometimes referred to as the unexpired risk reserve, though this term is also sometimes used to describe the premium deficiency provision alone.


            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 5.4.8

          An InsurerG must treat as a liability the value of future claims payments and associated direct and indirect settlement costs, arising from insured events that have occurred as at the Solvency Reference DateG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 5.4.8 Guidance

            The liability referred to in PIN Rule 5.4.8 is commonly referred to as the liability for outstanding claims. Some insurers represent this liability as three separate provisions, being the liability in respect of reported claims, the liability in respect of claims incurred but not reported, and the liability in respect of settlement costs, also known as loss adjustment expenses.


            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 5.4.9

          An InsurerG must treat as an asset the value of reinsurance and other recoveries expected to be received in respect of claims referred to in Rules PIN 5.4.7 and PIN 5.4.8.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 5.4.10

          Where this section requires an InsurerG to recognise as a liability the value of expected future payments, that liability must be measured as the net present value of those expected future payments.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 5.4.11

          Where this section requires an InsurerG to recognise as an asset the value of expected future receipts, that asset must be measured as the net present value of those expected future receipts.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 5.4.12

          Rules PIN 5.4.10 and PIN 5.4.11 do not require an InsurerG to obtain a valuation by an ActuaryG of the assets and liabilities referred to in those RulesG , at a Solvency Reference DateG other than the Insurer'sG annual reporting date.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 5.4.12 Guidance

            An InsurerG is also required to provide a periodic report on its General Insurance LiabilitiesG and associated assets, prepared by an ActuaryG . The relevant provisions are contained in PIN chapter 7.


            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 5.5 Discount rates

        • PIN 5.5.1

          The DFSAG may specify actuarial principles to be used by an InsurerG in measuring assets and liabilities.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 5.5.2

          For the purposes of determining the net present value of expected future payments in accordance with PIN Rule 5.4.10, an InsurerG must use as a discount rate the gross redemption yield, as at the Solvency Reference DateG , of a portfolio of AAA-RatedG sovereign risk securities with a similar expected payment profile to the liability being measured.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 5.5.3

          For the purposes of determining the net present value of expected future receipts in accordance with PIN Rule 5.4.11, an InsurerG must use as a discount rate the gross redemption yield, as at the Solvency Reference DateG , of a portfolio of AAA-RatedG sovereign risk securities with a similar expected payment profile to the asset being measured.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 5.5.3 Guidance

            1. Where an Insurer'sG Insurance BusinessG includes more than one Class of BusinessG , the InsurerG will normally be expected to establish payment profiles separately for each material Class of BusinessG .
            2. Where the expected payment profile of assets or liabilities cannot be matched — for example, because the duration is too long — the InsurerG should assume a discount rate regarded as consistent with the intention of this section.

            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 5.6 Recognition and measurement of assets and liabilities in respect of long-term insurance

        • PIN 5.6.1

          This section applies to assets and liabilities in respect of Long-Term InsuranceG contracts.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • The content selected is no longer in force and cannot be presented in Whole Section view.

        • PIN 5.6.2

          Premiums in respect of reinsurance contracts entered into by an InsurerG as insurer must be treated as receivable from the date on which they are due and receivable.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 5.6.3

          Premiums in respect of reinsurance contracts entered into by an InsurerG as cedant must be treated as payable from the date on which they are due and payable.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 5.6.4

          (1) Acquisition costs incurred in respect of insurance contracts entered into by an InsurerG must be treated as payable:
          (a) in the case of expenses directly related to the premiums in respect of the contract, at the same time as the premium is treated as receivable; and
          (b) in the case of expenses not directly related to the premiums in respect of the contract, at the time the contract is effected.
          (2) Expenses associated with the maintenance of insurance contracts, including, but not limited to, the costs of reporting to policyholders and the costs of managing investments, must be treated as payable as they are incurred.
          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 5.6.5

          An InsurerG must treat as a liability the amount of Policy BenefitsG that are due for payment on or before the Solvency Reference DateG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 5.6.6

          An InsurerG must treat as a liability the net present value of future Policy BenefitsG under policies that are in force as at the Solvency Reference DateG , taking into account all prospective liabilities as determined by the policy conditions for each existing contract, and taking credit for premiums payable after the Solvency Reference DateG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 5.6.7

          In measuring the liability referred to in PIN Rule 5.6.6, the InsurerG must:

          (a) use actuarial principles;
          (b) make proper provision for all liabilities on prudent assumptions that include appropriate margins for adverse deviation of the relevant factors;
          (c) assign a liability value greater than or equal to zero to each contract or to each homogeneous group of contracts;
          (d) not make allowance for any future lapse, surrender, making paid-up or revival of a contract where such an allowance would result in a decrease in the liability in respect of that contract;
          (e) take specifically into account:
          (i) all guaranteed Policy BenefitsG , including guaranteed surrender values;
          (ii) vested, declared or allotted bonuses or other forms of participation to which policy holders are already either collectively or individually contractually entitled;
          (iii) reasonable expectations of policyholders in respect of bonuses or other forms of participation, other than as set out in (ii);
          (iv) all options available to the policy holder under the terms of the contract;
          (v) discretionary charges and deductions from Policy BenefitsG , in so far as they do not exceed the reasonable expectations of policy holders;
          (vi) expenses, including commissions; and
          (vii) any rights under contracts of reinsurance in respect of Long-Term Insurance BusinessG ; and
          (f) apply a discount rate determined with reference to the expected risk-adjusted yield on the assets allocated to cover the liability and investment of net receipts attributable to the policies. In arriving at the discount rate, prudent allowance must be made for the risk of adverse deviation in those expected yields.
          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]

          • PIN 5.6.7 Guidance

            1. Because of PIN Rule 5.6.7(c), no policy may be treated as an asset in the valuation and policies must be valued individually, unless they form part of a homogeneous group of contracts. This means an InsurerG may treat groups of homogeneous contracts together and not breach the requirements in that RuleG , provided that the valuation in respect of that group of homogeneous contracts does not collectively represent an asset. The onus is on the InsurerG to demonstrate that the contracts represent a homogeneous group. In deciding whether to treat a group of contracts as homogeneous, an Insurer should consider whether the group would remain homogeneous under realistic scenarios to which the InsurerG could be exposed.
            2. PIN Rule 5.6.7(d) prevents an InsurerG from reducing the valuation by taking into account future lapses and surrenders, or future action by the policyholder to make the policy paid-up or to 'revive' a paid-up policy where the product features allow such action. Since persistency may be volatile, it is considered imprudent for an Insurer to rely upon 'lapse support' in its valuation. However, voluntary discontinuance of policies may increase a valuation as well as reduce it (for example, a guaranteed surrender value may exceed the actuarially-calculated liability for part of the life of the contract). In performing the valuation, the insurer should therefore make prudent allowance for the effect of lapses, surrenders, and related policyholder actions where these increase the valuation. The impact may vary over the life of a particular contract; for example, lapse at one stage in the contract life may represent a cost to the InsurerG , whereas at another, it may represent a benefit.
            3. PIN Rule 5.6.7(e)(iii) requires an InsurerG to take into account bonuses not yet allocated in determining the liability for capital adequacy purposes. In essence, this RuleG prevents an InsurerG from counting as capital any surplus on participating contracts that is expected, under the terms of the contracts concerned, to inure to the policyholders in the future. Therefore, although attribution of surplus on participating contracts is discretionary, the InsurerG must make a reasonable estimate, taking into account the perceived and reasonable expectations of policyholders. Assumptions made in reaching this estimate (for example, on future investment income) should be consistent with those made for other purposes of the valuation. However, the recognition of future bonuses or other forms of participation in this liability does not affect the determination of surplus for other purposes, such as allocation of bonuses of surplus prior to allocation of those bonuses.
            4. For the purposes of PIN Rule 5.6.7(f), an Insurer should ensure that yields used to determine the discount rate are adjusted to take account of the risk that yields will decrease. High yields that represent compensation for risks such as credit or currency risk should be adjusted down to normalise for those elements of the yield.
            [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 5.6.8

          The DFSAG may specify actuarial principles to be followed by InsurersG in measuring the liability referred to in PIN Rule 5.6.6.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 5.6.9

          PIN Rule 5.6.6 does not require an InsurerG to obtain a valuation by an ActuaryG of the liability referred to in that RuleG , at a Solvency Reference DateG other than the Insurer'sG annual reporting date.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 5.6.9 Guidance

            An InsurerG is also required to provide a periodic report on its Long-Term Insurance LiabilitiesG , prepared by an ActuaryG , including an actuarial investigation of the financial condition of its Long-Term Insurance BusinessG . The relevant provisions are set out in PIN section 7.3.


            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 5.7 Value of investments in subsidiaries and associates that are subject to minimum capital requirements

        • PIN 5.7.1

          This section applies to all InsurersG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 5.7.2

          Where an InsurerG is the Parent of a Financial Group, the value of the Insurer'sG investment in any SubsidiaryG or AssociateG that is an Authorised FirmG or a Financial InstitutionG must be taken as the amount of the Insurer'sG proportionate share of that SubsidiaryG or Associate'sG Capital ResourcesG or Adjusted Capital ResourcesG determined in accordance with PIN Rule 8.3.4(1)(b), reduced by the Insurer'sG proportionate share of the SubsidiaryG or Associate'sG Capital RequirementG determined in accordance with PIN Rule 8.3.3(2).

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]

          • PIN 5.7.2 Guidance

            The impact of PIN Rule 5.7.2 is that an Insurer'sG capital resources are calculated on a basis consistent with the manner of calculation of Financial Group Capital ResourcesG , and that capital resources required to support the capital adequacy of GroupG companies are not used to support the individual capital adequacy of the InsurerG itself. The Insurer'sG capital adequacy calculation is therefore also an indication of the degree of capital adequacy of the Financial GroupG of which it is the ParentG . In this and other RulesG where reference is made to a ParentG for the purposes of calculating capital adequacy of a group of companies, generally, it is a reference to the ultimate ParentG within the group.

            [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

      • PIN 5.8 Transfer of risk by an Insurer to an ISPV

        • PIN 5.8.1

          This section applies to all InsurersG .

          [Added] DFSA RM48/2007 (Made 1st October 2007). [VER7/10-07]

        • PIN 5.8.2

          An InsurerG may not:

          (a) treat amounts recoverable from an ISPVG as:
          (i) an asset; or
          (ii) reinsurance for the purposes of calculating its liabilities under contracts of insurance it has effected; or
          (b) otherwise ascribe a value to such amounts;
          unless it has first obtained a waiver from the DFSAG .

          [Added] DFSA RM48/2007 (Made 1st October 2007). [VER7/10-07]

          • PIN 5.8.2 Guidance

            In considering:

            a. whether to grant such a waiver; and
            b. the amount which the DFSAG will allow the InsurerG to bring into account for these purposes;

            the DFSAG will take into account the following factors:

            c. where the ISPVG is an Authorised ISPVG , the DFSAG will wish to be satisfied that the ISPVG complies with PIN Rules 10.1.2 to 10.1.7 The DFSAG may rely on information supplied in connection with the ISPV'sG application for authorisation. However, if the application for a waiver is made after authorisation has been granted, the DFSAG may request confirmation that there has been no material change to the information originally supplied;
            d. where the ISPVG is not authorised, the DFSAG will expect to receive confirmation that the ISPVG is subject to regulation by a Financial Services RegulatorG in a jurisdiction acceptable to the DFSAG . In addition, it will need details of the debt issuance or other financing mechanism by which the ISPV'sG reinsurance liabilities are funded. The DFSAG will also expect to receive information about the ISPV'sG key management and control functions, including details of the ISPV'sG auditors and arrangements for claims handling, and any material outsourcing agreements. The DFSAG will also need information about the structure of any GroupG of which the ISPVG is a member;
            e. no credit will be allowed for a contract of reinsurance with an ISPVG unless there is an effective transfer of risk to the ISPVG . The DFSAG will require evidence of such transfer.
            f. the DFSAG will also expect to receive an analysis of the potential for risk to revert to the InsurerG or any of its associates under realistic adverse scenarios or for liabilities to arise in respect of the risks transferred for which no provision has been made.

            [Added] DFSA RM48/2007 (Made 1st October 2007). [VER7/10-07]

    • PIN 6 Financial and Other Reporting by Insurers

      • PIN 6.1 Introduction

        • PIN 6.1.1

          This chapter applies to all InsurersG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • [Deleted]

            [Deleted] DFSA RM51/2007 (Made 1st November 2007). [VER8/11-07]

      • PIN 6.2 Annual regulatory return

        • PIN 6.2.1

          An InsurerG must, at the end of each reporting period, prepare an Annual Regulatory ReturnG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 6.2.2

          The Annual Regulatory ReturnG must comprise the statements set out in PIN App10, together with any Supplementary NotesG pertaining to those forms, and including a Statement by DirectorsG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended][VER3/08-06]
          [Amended] DFSA RM44/2007 (Made 1st June 2007). [VER5/06-07]

        • PIN 6.2.3

          The form and content of the statements comprising the Annual Regulatory ReturnG (including the Statement by DirectorsG ) is set out in PIN App10, PRU and the DFSA's electronic prudential reporting system.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended][VER3/08-06]
          [Amended] DFSA RM44/2007 (Made 1st June 2007). [VER5/06-07]
          [Amended] DFSA RM51/2007 (Made 1st November 2007). [VER8/11-07]

          • PIN 6.2.3 Guidance

            The Returns and instructional guidelines are provided in PIN App10, PRU and the DFSA'sG electronic prudential reporting system.

            [Added] DFSA RM51/2007 (Made 1st November 2007). [VER8/11-07]

        • PIN 6.2.4

          Where an InsurerG includes in its Annual Regulatory ReturnG a value for General Insurance LiabilitiesG or for assets associated with those liabilities which is inconsistent with the amount referred to in PIN Rule 7.2.4 (b), the InsurerG must notify the DFSAG in writing of:

          (a) the reasons for not including in its Annual Regulatory ReturnG the value of General Insurance LiabilitiesG or of associated assets as reported by the ActuaryG ; and
          (b) details of the alternative assumptions and methodologies used for determining the value of General Insurance LiabilitiesG or of associated assets.
          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 6.2.4 Guidance

            Assets that are associated with Insurance LiabilitiesG will predominantly be reinsurance recoveries, which are reported as assets in accordance with widely accepted accounting practice. Assets representing salvage or subrogation recoveries may also be associated with Insurance LiabilitiesG .


            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 6.2.5

          Where an InsurerG includes in its Annual Regulatory ReturnG a value for Long-Term Insurance LiabilitiesG which is inconsistent with the amount referred to in PIN Rule 7.3.6 (b), the InsurerG must notify the DFSAG in writing of:

          (a) the reasons for not including in its Annual Regulatory ReturnG the value of Long-Term Insurance LiabilitiesG as reported by the ActuaryG ; and
          (b) details of the alternative assumptions and methods used by the InsurerG for determining the value of Long-Term Insurance LiabilitiesG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 6.3 Quarterly regulatory return

        • PIN 6.3 Guidance

          The Quarterly Regulatory ReturnG is not subject to audit.

          [Added] DFSA RM51/2007 (Made 1st November 2007). [VER8/11-07]

        • PIN 6.3.1

          Subject to PIN Rule 6.3.4, an InsurerG must, at the end of March, June, September and December in each year, prepare a Quarterly Regulatory ReturnG in respect of the period commencing at the start of the Insurer'sG reporting period and ending on that date.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 6.3.2

          The Quarterly Regulatory ReturnG must comprise the statements set out in PIN App10, together with any Supplementary NotesG pertaining to those forms, and including a Statement by DirectorsG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended][VER3/08-06]
          [Amended] DFSA RM44/2007 (Made 1st June 2007). [VER5/06-07]
          [Amended] DFSA RM51/2007 (Made 1st November 2007). [VER8/11-07]

        • PIN 6.3.3

          The form and content of the statements comprising the Quarterly Regulatory ReturnG (including the Statement by DirectorsG ) are set out in PIN App10, PRU and the DFSA'sG electronic prudential reporting system.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended][VER3/08-06]
          [Amended] DFSA RM44/2007 (Made 1st June 2007). [VER5/06-07]
          [Amended] DFSA RM51/2007 (Made 1st November 2007). [VER8/11-07]

          • PIN 6.3.3 Guidance

            The Returns and instructional guidelines are provided in PIN App10, PRU and the DFSA'sG electronic prudential reporting system.

            [Added] DFSA RM51/2007 (Made 1st November 2007). [VER8/11-07]

        • PIN 6.3.4

          The following InsurersG are not required to prepare a Quarterly Regulatory ReturnG unless required in writing by the DFSAG to do so:

          (a) a Class 1 Captive InsurerG ; and
          (b) an InsurerG that is a Protected Cell CompanyG where every CellG maintained by the InsurerG is a Class 1 Captive CellG or a Class 2 Captive CellG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 6.4 Audit of annual regulatory return

        • PIN 6.4.1

          Subject to PIN Rule 6.4.2, the Annual Regulatory ReturnG of every InsurerG must be audited in accordance with International Statements on Auditing relevant to the audit of the Annual Regulatory ReturnG , by the Insurer'sG auditor.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 6.4.1 Guidance

            The Quarterly Regulatory ReturnG is not subject to audit. The qualifications and appointment of the auditor of an Authorised FirmG are specified in GEN chapter 8.

            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
            [Amended] DFSA RM51/2007 (Made 1st November 2007). [VER8/11-07]

        • PIN 6.4.2

          The statements in the Annual Regulatory ReturnG that are not subject to audit are set out in PIN App10, PRU and the DFSA'sG electronic prudential reporting system.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended][VER3/08-06]
          [Amended] DFSA RM44/2007 (Made 1st June 2007). [VER5/06-07]
          [Amended] DFSA RM51/2007 (Made 1st November 2007). [VER8/11-07]

        • PIN 6.4.3

          The report of the auditor on the Annual Regulatory ReturnG must be made in writing to the directors of the InsurerG and to the DFSAG and must state whether, in the opinion of the Auditor and so far as concerns those parts of the Annual Regulatory ReturnG that are subject to audit:

          (a) the Annual Regulatory ReturnG has been prepared in accordance with this chapter;
          (b) the statements in the Annual Regulatory ReturnG present fairly, in accordance with the basis of preparation prescribed in this chapter, the financial position of the InsurerG as at the reporting date and financial performance of the InsurerG during the reporting period ended on that date, and the other information required to be presented; and
          (c) the statements in the Annual Regulatory ReturnG are in accordance with the books and records of the InsurerG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 6.5 Submission of Returns to the DFSA

        • PIN 6.5.1

          Subject to PIN Rule 6.5.2, an Authorised FirmG must, submit its Annual Regulatory ReturnG in writing to the DFSAG within four months of the Insurer'sG reporting date to:

          Supervision Division
          DFSA
          Level 13, The Gate
          PO Box 75850
          Dubai, United Arab Emirates

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] DFSA RM51/2007 (Made 1st November 2007). [VER8/11-07]

        • PIN 6.5.2

          An Authorised FirmG must, prepare and submit its Annual Regulatory ReturnG in the following manner:

          (a) the Annual Regulatory ReturnG , excepting the parts of the Annual Regulatory ReturnG referred to in (b) and (c), must be submitted to the DFSAG using the electronic prudential reporting system:
          (i) in accordance with any instructions set out in the notice and any instructions provided through such a system or specified in PIN App10 and PRU; and
          (ii) within four months of the Insurer's reporting date;
          (b) the Statement by DirectorsG need not be submitted to the DFSAG , but must be signed and a copy maintained in accordance with Rules PIN 6.5.3 and PIN 6.5.4; and
          (c) the Global ReturnG for a BranchG must be submitted in the manner provided in Rule PIN 6.5.1.
          [Added] DFSA RM51/2007 (Made 1st November 2007). [VER8/11-07]
          [Amended] DFSA RM54/2007 (Made 1st December 2007). [VER9/12-07]
          [Amended] DFSA RM128/2013 (Made 14th July 2013). [VER13/07-13]

          • PIN 6.5.2 Guidance

            The ReturnsG and instructional guidelines are provided in PIN App10, PRU and the DFSA'sG electronic prudential reporting system.

            [Added] DFSA RM51/2007 (Made 1st November 2007). [VER8/11-07]

        • PIN 6.5.3

          The Statement by DirectorsG forming part of the Annual Regulatory ReturnG must be signed before the time of submission by:

          (a) the Senior Executive OfficerG ; and
          (b) a DirectorG of the InsurerG not being the PersonG in (a).
          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] DFSA RM51/2007 (Made 1st November 2007). [VER8/11-07]
          [Amended] DFSA RM54/2007 (Made 1st December 2007). [VER9/12-07]

        • PIN 6.5.4

          An original signed hard copy of the Statement by DirectorsG together with a copy of the Annual Regulatory ReturnG submitted to the DFSAG using the DFSA’sG electronic prudential reporting system, must be kept for at least 6 years for inspection by the DFSAG .

          [Added] DFSA RM51/2007 (Made 1st November 2007). [VER8/11-07]
          [Amended] DFSA RM54/2007 (Made 1st December 2007). [VER9/12-07]

        • PIN 6.5.5

          The auditor's report on the Annual Regulatory ReturnG , and any actuarial report prepared as at the reporting date in accordance with section PIN 7.2 or PIN 7.3, must be submitted in writing by the InsurerG with the DFSAG within four months of the Insurer'sG reporting date.

          [Added] DFSA RM51/2007 (Made 1st November 2007). [VER8/11-07]

        • PIN 6.5.6

          An auditor's report or an actuarial report submitted to the DFSAG must be signed by the auditor or the ActuaryG preparing that report.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] DFSA RM51/2007 (Made 1st November 2007). [VER8/11-07]

        • PIN 6.5.7

          Subject to PIN Rule 6.5.8, an Authorised FirmG must, submit its Quarterly Regulatory ReturnG in writing to the DFSAG within one month of the end of each period in respect of which the Insurer is required to prepare a Quarterly Regulatory ReturnG to:

          Supervision Division
          DFSA
          Level 13, The Gate
          PO Box 75850
          Dubai, United Arab Emirates

          [Added] DFSA RM51/2007 (Made 1st November 2007). [VER8/11-07]
          [Amended] DFSA RM136/2014 (Made 21st August 2014). [VER14/06-14]

        • PIN 6.5.8

          An Authorised FirmG must, prepare and submit its Quarterly Regulatory ReturnG in the following manner:

          (a) the Quarterly Regulatory ReturnG , excepting the parts of the Quarterly Regulatory ReturnG referred to in (b) and (c), must be submitted to the DFSAG using the DFSA'sG electronic prudential reporting system:
          (i) in accordance with any instructions set out in the notice and any instructions provided through such a system or specified in PIN App10 and PRU; and
          (ii) within one month of the Insurer'sG reporting date;
          (b) the Statement by DirectorsG must be signed and a copy maintained in accordance with Rules PIN 6.5.9 and PIN 6.5.10; and
          (c) the Global ReturnG for a BranchG must be submitted in the manner provided in Rule PIN 6.5.7.
          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] DFSA RM51/2007 (Made 1st November 2007). [VER8/11-07]
          [Amended] DFSA RM54/2007 (Made 1st December 2007). [VER9/12-07]
          [Amended] DFSA RM128/2013 (Made 14th July 2013). [VER13/07-13]
          [Amended] DFSA RM136/2014 (Made 21st August 2014). [VER14/06-14]

          • PIN 6.5.8 Guidance

            The ReturnsG and instructional guidelines are provided in PIN App10, PRU and the DFSA'sG electronic prudential reporting system.

            [Added] DFSA RM51/2007 (Made 1st November 2007). [VER8/11-07]

        • PIN 6.5.9

          The Statement by DirectorsG forming part of the Quarterly Regulatory ReturnG must be signed before the time of submission by:

          (a) if the InsurerG is a DIFC Incorporated InsurerG , one DirectorG of the InsurerG ; or
          (b) if the InsurerG is not a DIFC Incorporated InsurerG , the Senior Executive OfficerG and, if that PersonG is not a DirectorG , one DirectorG of the InsurerG .
          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] DFSA RM51/2007 (Made 1st November 2007). [VER8/11-07]
          [Amended] DFSA RM54/2007 (Made 1st December 2007). [VER9/12-07]

        • PIN 6.5.10

          An original signed hard copy of the Statement by DirectorsG together with a copy of the Quarterly Regulatory ReturnG submitted to the DFSAG using the DFSA'sG electronic prudential reporting system, must be kept for at least 6 years for inspection by the DFSAG .

          [Added] DFSA RM51/2007 (Made 1st November 2007). [VER8/11-07]
          [Amended] DFSA RM54/2007 (Made 1st December 2007). [VER9/12-07]

        • PIN 6.5.11

          If within 24 months of the date that an Annual Regulatory ReturnG or Quarterly Regulatory ReturnG is submitted to the DFSAG , the DFSAG notifies the InsurerG that a ReturnG appears to be inaccurate or incomplete, the InsurerG must consider the matter and within one month of the date of notification it must correct any inaccuracies and make good any omissions and re-submit the relevant parts of the ReturnG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] DFSA RM51/2007 (Made 1st November 2007). [VER8/11-07]

        • PIN 6.5.12

          An InsurerG must submit, at the same time as every Annual Regulatory ReturnG of that InsurerG or as soon as practicable thereafter, any report on the affairs of the InsurerG submitted to the shareholders or policyholders of the InsurerG in respect of the reporting period to which the Annual Regulatory ReturnG relates.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] DFSA RM51/2007 (Made 1st November 2007). [VER8/11-07]

          • [Deleted]

            [Deleted] DFSA RM51/2007 (Made 1st November 2007). [VER8/11-07]

        • PIN 6.5.13 [Deleted]

          [Deleted] DFSA RM199/2017 (Made 19th April 2017). [VER15/01-18]

          • PIN 6.5.13 Guidance

            Derived from DFSA RM128/2013 (Made 14th July 2013). [VER13/07-13]
            [Amended] DFSA RM199/2017 (Made 19th April 2017). [VER15/01-18]

      • PIN 6.6 Reporting of group capital adequacy

        • PIN 6.6.1

          An InsurerG must, at the end of each reporting period and at the mid-point of each reporting period, prepare a report on the Financial GroupG capital adequacy of any Financial GroupG of which it is a member and in respect of which it is required by PIN Chapter 8 to calculate Financial Group Capital RequirementsG and Financial Group Capital ResourcesG . This ReportG shall be known as the Financial Group Capital Adequacy ReportG .

          [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 6.6.2

          (1) The Financial Group Capital Adequacy ReportG must be filed in writing by the Insurer with the DFSA:
          (a) within four months of the Insurer'sG reporting date in the case of a report at the end of a reporting period; or
          (b) within one month of the Insurer'sG mid-year date in the case of a report at the mid-point of a reporting period.
          (2) The Financial Group Capital Adequacy ReportG must state:
          (a) the name of the InsurerG ;
          (b) the reference date of the report;
          (c) the name, location and activity of the ParentG entity of the Financial Group in respect of which the report is made;
          (d) the Financial Group Capital ResourcesG , calculated in accordance with PIN Rule 8.3.4;
          (e) the Financial Group Capital RequirementG , calculated in accordance with PIN Rule 8.3.3;
          (f) the amount of surplus or deficit, expressed as the amount in (d) minus the amount in (e);
          (g) a list of all Authorised FirmsG and Financial InstitutionsG in the Financial GroupG ;
          (h) if any Authorised FirmG in the Financial GroupG is itself a ParentG , the items referred to in (d), (e) and (f) in respect of the Financial GroupG headed by that Authorised FirmG ; and
          (i) particulars of any Authorised FirmG or Financial InstitutionG in the Financial GroupG in respect of which the capital requirement calculated in accordance with PIN Rule 8.3.3 exceeds its Capital ResourcesG or Adjusted Capital ResourcesG calculated in accordance with PIN Rule 8.3.4(1)(b).
          (3) Amounts in the Financial Group Capital Adequacy ReportG must be expressed in thousands of dollars.
          (4) The Financial Group Capital Adequacy ReportG must be signed by:
          (a) the PersonsG specified in PIN Rule 6.5.3 in the case of a report at the end of a reporting period; or
          (b) the PersonsG specified in PIN Rule 6.5.9 in the case of a report at the mid-point of a reporting period.
          (5) The Financial Group Capital Adequacy ReportG must be accompanied by a statement by the Insurer'sG auditor, made in writing to the directors of the InsurerG and to the DFSAG , and stating whether any significant matter has come to the attention of the auditor to indicate that the report has not been properly compiled in accordance with the requirements of this section, from information provided to the InsurerG by other members of the Financial GroupG and from the Insurer'sG own records.
          [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]
          [Amended] DFSA RM54/2007 (Made 1st December 2007). [VER9/12-07]
          [Amended] DFSA RM136/2014 (Made 21st August 2014). [VER14/06-14]

          • PIN 6.6.2 Guidance

            1. Where information that would be contained in the Financial Group Capital Adequacy ReportG would be identical with information previously or concurrently provided to the DFSAG pursuant to this or another provision of the RulebookG , and that information has not changed, the DFSAG will normally accept a statement to that effect in the report in place of that information.
            2. Form IN 170 in PRU may be used by an InsurerG to present the Financial Group Capital Adequacy ReportG . Use of this form is not mandatory, however if the form is used the instructional guidelines in PRU must be observed.
            [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]
            [Amended] DFSA RM54/2007 (Made 1st December 2007). [VER9/12-07]

    • PIN 7 Actuaries

      • PIN 7.1 Introduction

        • PIN 7.1 Guidance

          This chapter requires an InsurerG to provide the DFSAG with a report by an ActuaryG in respect of its Insurance LiabilitiesG and assets arising in respect of those liabilities (that is, assets which are contingent on the existence and amount of the liabilities, such as reinsurance, salvage and subrogation recoveries). Separate provisions apply in respect of reports on General Insurance BusinessG and Long-Term Insurance BusinessG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 7.2 The requirement for an actuarial report on general insurance business

        • PIN 7.2.1

          Subject to PIN Rule 7.2.2, this section applies to InsurersG conducting General Insurance BusinessG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 7.2.2

          Where an InsurerG attributes General Insurance BusinessG to a Long-Term Insurance FundG in accordance with PIN Rule 3.3.4, this section does not apply to that business.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 7.2.3

          Every InsurerG must provide to the DFSAG as at each reporting date a written report relating to its General Insurance BusinessG , prepared by an ActuaryG who has the qualifications set out in PIN section 7.5.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 7.2.4

          This report must provide details in respect of each Class of BusinessG , of:

          (a) significant aspects of the recent experience of the InsurerG ;
          (b) the Actuary'sG estimate of the value of General Insurance LiabilitiesG and of assets arising in respect of those liabilities, determined in accordance with PIN chapter 5;
          (c) where there has been a change in the assumptions or in valuation method from that adopted at the previous valuation, the effect of these changes on the General Insurance LiabilitiesG and assets arising in respect of those liabilities, as at the reporting date;
          (d) the adequacy and appropriateness of data made available to the ActuaryG by the InsurerG ;
          (e) procedures undertaken by the ActuaryG to assess the reliability of the data;
          (f) the model or models used by the ActuaryG ;
          (g) the assumptions used by the ActuaryG in the valuation process including, without limitation, assumptions made as to inflation and discount rates, future expense rates and, where relevant, future investment income;
          (h) the approach taken to estimate the variability of the estimate; and
          (i) the nature and findings of sensitivity analyses undertaken.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 7.3 The requirement for an actuarial investigation of and report on long-term insurance business

        • PIN 7.3.1

          This section applies to InsurersG conducting Long-Term Insurance BusinessG , in respect of each Long-Term Insurance FundG maintained or deemed to be maintained by the InsurerG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 7.3.2

          Every InsurerG must arrange for an actuarial investigation of the assets and liabilities of every Long-Term Insurance FundG maintained or deemed to be maintained by it, including a determination of surplus in each such fund, to be performed as at a Reference DateG which must be not more than one year later than the date of establishment of the Long-Term Insurance FundG or the previous Reference DateG (if later).


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 7.3.3

          An investigation of the type set out in PIN Rule 7.3.2 must in any case be performed as at every reporting date of the InsurerG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 7.3.4

          An actuarial investigation under this section must be performed by an ActuaryG who has the qualifications set out in PIN section 7.5, and must be conducted according to principles approved by the DFSAG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 7.3.4 Guidance

            Principles set out in professional standards issued by a professional actuarial body that is a full member of the International Actuarial Association will normally be approved by the DFSAG for the purposes of PIN Rule 7.3.4, to the extent that they do not conflict with the provisions of this chapter.


            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 7.3.5

          When an InsurerG arranges for an actuarial investigation under this section, the InsurerG must provide to the DFSAG a written report prepared by the ActuaryG conducting the actuarial investigation, not later than four months from the Reference DateG of the actuarial investigation.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 7.3.6

          This report must provide details of, in respect of each Class of BusinessG :

          (a) the product range;
          (b) any discretionary charges and benefits, options and guarantees, and reversionary bonus entitlements, where such features are included in a product;
          (c) reinsurance arrangements;
          (d) significant aspects of the recent experience of the InsurerG , including, where relevant, a commentary on significant deviations of actual experience compared to the assumptions made in the previous valuation;
          (e) the Actuary'sG estimate of the value of Long-Term Insurance LiabilitiesG , determined in accordance with PIN chapter 5;
          (f) the method and assumptions used by the ActuaryG in the valuation process, including, where relevant, a commentary on significant differences between the assumptions used and recent actual experience of the InsurerG ;
          (g) any expense reserves, mismatching reserves and any other special reserves included by the ActuaryG in the value of the Long-Term Insurance LiabilitiesG , or recommended by the ActuaryG to be maintained, although not included in the valuation;
          (h) a determination of the value of surplus in the Long-Term Insurance FundG , before any distribution of such surplus;
          (i) a description of the Invested AssetsG used to determine the risk-adjusted yield on which the discount rate used in the valuation was based;
          (j) the adequacy and appropriateness of data made available to the ActuaryG by the InsurerG ;
          (k) procedures undertaken by the ActuaryG to assess the reliability of the data;
          (l) the model or models used by the ActuaryG ;
          (m) the approach taken to estimate the variability of the estimate;
          (n) the sensitivity analyses undertaken;
          (o) any significant changes to the matters reported on during the period since the previous valuation, including, in the case of the matters referred to in (f), and otherwise, where relevant, an estimate of the effect of these changes on the Long-Term Insurance LiabilitiesG as at the Reference DateG ; and
          (p) commentary on any other factors affecting the valuation.
          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]

          • PIN 7.3.6 Guidance

            1. The assumptions and comparisons referred to in PIN Rule 7.3.6(d) and (f) should cover all significant components of the valuation, including consideration of persistency, mortality, expense levels, and investment returns.
            2. Where the business of the Insurer includes participating Long-Term Insurance BusinessG , it will be necessary for the determination at PIN Rule 7.3.6(h) to deal separately with surplus for the purposes of a decision on allocation of bonuses and surplus for the purposes of determining the capital adequacy of the FundG . For the former of these two purposes, the insurer is identifying the pool, commonly known as surplus, that is available for allocation as bonuses (or equivalent) on participating policies. The allocation then reduces the surplus (note — by convention, this is treated as happening as at the reporting date). By contrast, for the latter of the two purposes, that portion of the remaining surplus that is expected to be allocated eventually to policyholders is also treated as a liability (in PIN Rule 5.6.7), on the grounds that it is not available to absorb losses of the InsurerG . For that purpose, declaration of bonuses merely represents a transfer from one recognised liability to another.
            3. Factors that the ActuaryG should consider for the purposes of PIN Rule 7.3.6(p) may include risks that may vary between the jurisdictions in which business is carried on, as well as generic risks. The former category might include the risk of political unrest, and the latter operational risks such as fraud.
            4. The DFSAG may specify additional information to be presented in the Actuary'sG report. PIN 3.6.1 Guidance indicates that, where the DFSAG permits an InsurerG to carry on Direct Long-Term Insurance BusinessG with features of a kind described in PIN Rule 3.6.1(1), it may, as a condition of that permission, require additional information to be provided in the Actuary'sG report. That additional information could include, for example, detail on market-consistent valuations of guarantees or options, and the results of scenario testing.
            [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 7.3.7

          Subject to PIN Rule 7.3.8, where an InsurerG carries on Direct Long-Term Insurance BusinessG , the report referred to in PIN Rule 7.3.5 must include the information set out in PIN Rule 7.3.6 in respect of such business segregated by the jurisdiction in which it is carried on.

          [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 7.3.8

          Where business in a jurisdiction is of limited significance, disclosures may, at the discretion of the ActuaryG , be aggregated for those jurisdictions.

          [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

      • PIN 7.4 Additional provisions relating to the report

        • PIN 7.4.1

          When appointing an ActuaryG to prepare a report under PIN section 7.2 or PIN 7.3, an InsurerG must ensure that there is an agreement in writing which legally binds the ActuaryG in accordance with the following provisions:

          (a) the contract must require the ActuaryG to prepare his report in accordance with the provisions of PIN section 7.2 or PIN 7.3 as the case may be;
          (b) the contract must require the ActuaryG to prepare the report using assumptions and methods that are, in the opinion of the ActuaryG , appropriate for the purposes of the report;
          (c) the contract must require the ActuaryG to deliver the report to the Insurer'sG directors within such time as to give the directors a reasonable opportunity to consider and use the report in preparing the Insurer'sG Annual Regulatory ReturnG for the reporting period ended on the reporting date;
          (d) the contract must require and permit the ActuaryG to address the directors of the InsurerG if the ActuaryG believes that there is a matter relating to the financial position or operations of the InsurerG that should be brought to the attention of the directors; and
          (e) the contract must require and permit the ActuaryG to address the DFSAG if the ActuaryG believes that a matter brought to the attention of the directors of the InsurerG is not adequately dealt with by bringing it to the attention of the directors.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 7.4.2

          An InsurerG that has appointed an ActuaryG to provide a report under section PIN 7.2 or PIN 7.3 must make arrangements to enable the ActuaryG to undertake his functions, and in particular must:

          (a) keep the ActuaryG informed of the Insurer'sG business and other plans;
          (b) ensure that the ActuaryG is fully informed of the RulesG in PING applicable to the InsurerG , as well as any other information that the DFSAG has provided to the InsurerG that may assist the ActuaryG in performing his duties; and
          (c) ensure that the ActuaryG has access at appropriate times to all relevant data and people which the ActuaryG reasonably believes is necessary to fulfil his obligations to the InsurerG in respect of this chapter.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 7.4.3

          The InsurerG must submit the reports referred to in PIN section 7.2 and PIN section 7.3 to the DFSAG , at the same time as it submits its Annual Regulatory ReturnG for the reporting period ended on the reporting date.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 7.4.4

          Where an InsurerG is not a DIFC Incorporated InsurerG , a report prepared under section PIN 7.2 or PIN 7.3 must deal separately with the DIFCG Insurance BusinessG of the InsurerG , and the Insurance BusinessG of the InsurerG as a whole.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 7.4.5

          Abbreviated details may be provided in a report prepared under the requirements of this chapter in respect of a Class of BusinessG that is not material.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 7.4.5 Guidance

            For the purposes of PIN Rule 7.4.5, a Class of BusinessG that accounts for less than ten per cent of the Insurer'sG Net Written PremiumG in the reporting period ended on the reporting date and that accounts for less than ten per cent of the Insurer'sG Insurance LiabilitiesG as at the reporting date, will normally be considered immaterial.


            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 7.5 Qualifications of the actuary

        • PIN 7.5.1

          An ActuaryG appointed to provide an actuarial report under this chapter must:

          (a) have experience in the determination of liabilities in the Classes of BusinessG dealt with in the actuarial report; and
          (b) have the required skill and experience to perform his functions under the DIFCG regulatory system.
          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 7.5.1 Guidance

            The RulesG do not require an InsurerG to use the same ActuaryG for all reports. An InsurerG may provide separate reports, prepared by more than one ActuaryG , where the InsurerG undertakes different Classes of BusinessG , provided that each ActuaryG is appropriately qualified for the Classes of BusinessG on which he reports. Similarly, an InsurerG may appoint different ActuariesG , each appropriately qualified, to provide reports in respect of Insurance BusinessG conducted in or in respect of different geographical locations, for example DIFCG Insurance BusinessG and other Insurance BusinessG .


            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 7.5.2

          An InsurerG must notify the DFSAG in writing of the name, professional qualifications and relevant experience of each person that the InsurerG proposes to appoint to provide an actuarial report under this chapter.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 7.5.3

          The DFSAG may, if it does not believe that the ActuaryG proposed by the InsurerG possesses the qualifications set out in PIN Rule 7.5.1, notify the InsurerG in writing that another ActuaryG must be appointed.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 7.5.4

          An InsurerG must notify the DFSA immediately on the termination or resignation of its ActuaryG , giving the reasons for such termination or resignation.

          [Added] DFSA RM99/2012 (Made 24th July 2012) [VER12/07-12]

    • PIN 8 Consolidated Supervision

      • PIN 8.1 Introduction

        • PIN 8.1.1

          This chapter applies to all InsurersG , except for PIN Rule 8.5.1 which applies only to DIFC Incorporated InsurersG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]

          • PIN 8.1.1 Guidance

            1. GroupG membership may be a source of both strength and weakness to an InsurerG . The purpose of Group RiskG requirements is to ensure that an Insurer takes proper account of the risks related to the Insurer'sG membership of a GroupG . The Group RiskG requirements form a key part of the DFSA'sG overall approach to prudential supervision.
            2. An InsurerG is subject to separate reporting requirements in respect of changes in its ControllersG . Those requirements are set out in chapter 11 of GEN. It may be also be required to provide reports in respect of any Close LinksG it possesses.

            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
            [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]
            [Amended] DFSA GM8/2011 (Made 28th April 2011). [VER11/02-11]

        • PIN 8.1.2

          (1) If an InsurerG is a member of a Financial GroupG and the DFSAG considers it necessary to extend the scope of the Financial GroupG to include entities outside of the Financial GroupG to ensure appropriate Financial GroupG supervision, an Insurer must also include in the scope of the Financial GroupG any entity the DFSAG may direct the Insurer in writing to include.
          (2) An InsurerG may, for the purposes of this section, exclude from its Financial GroupG , any entity the inclusion of which would be misleading or inappropriate for the purposes of Financial GroupG supervision, provided the Insurer has obtained the DFSA'sG prior written approval to do so.
          (3) An InsurerG must provide to the DFSAG , where requested, information regarding other GroupG entities, the GroupG structure and the systems and controls in place to manage Group RiskG .
          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]

          • PIN 8.1.2 Guidance

            If more than one member of the same GroupG is subject to an obligation to provide information in respect of a position of the GroupG , one or more of those Authorised FirmsG may make application to the DFSAG for an appropriate waiver or modification of these RulesG .

            [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

      • PIN 8.2 Systems and controls requirements

        • PIN 8.2.1

          If an InsurerG is a member of a GroupG , it must establish and maintain systems and controls for the purpose of:

          (a) monitoring the effect on the InsurerG of:
          (i) its relationship with other members of its GroupG ;
          (ii) its membership in its GroupG ; and
          (iii) the activities of other members of its GroupG ; and
          (b) monitoring compliance with Financial GroupG supervision requirements below, including systems for the production of relevant data:
          (i) monitoring funding within the Financial GroupG ; and
          (ii) monitoring compliance with Financial GroupG reporting requirements.
          [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

          • PIN 8.2.1 Guidance

            1. For the purposes of the above requirement, an InsurerG may take into account its position within its GroupG , the materiality of the risk to which it is exposed because of its membership of the GroupG , and the access that it has to the systems and controls of other members of its GroupG and any information produced by them or by AssociatesG . For example, it would be reasonable for a small Insurer within a larger GroupG to place some reliance on its ParentG to ensure that appropriate systems and controls are in place.
            2. An InsurerG may also consider together GroupsG whose ParentsG are all members of the same GroupG , except for any GroupG of which the InsurerG is the ParentG . An InsurerG that is itself the ParentG of a GroupG must give specific consideration to the risks to which it is exposed as the ParentG . The DFSAG will not otherwise however normally expect an InsurerG to apply the provisions of this RuleG to sub-GroupsG of a single GroupG .
            [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

      • PIN 8.3 Financial group capital requirements and financial group capital resources

        • PIN 8.3.1

          (1) PIN Section 8.3 does not apply to an InsurerG if:
          (a) the Insurer'sG Financial GroupG is already the subject of Financial GroupG prudential supervision by the DFSAG as a result of the authorisation of another Financial GroupG member; or
          (b) the DFSAG has confirmed in writing, in response to an application from the InsurerG , that it is satisfied that the Insurer'sG GroupG is the subject of consolidated prudential supervision by an appropriate regulator; or
          (c) except where the DFSAG has directed the inclusion of an entity pursuant to PIN Rule 8.1.2(1), the percentage of total assets of Authorised FirmsG and Financial InstitutionsG in the Financial GroupG is less than 40% of the total Financial GroupG assets.
          (2) Where an Insurer has received confirmation in writing from the DFSAG in accordance with (1)(b), it must immediately advise the DFSAG in writing if the circumstances upon which the confirmation was based change.
          [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 8.3.2

          Where a Financial GroupG contains both InsurersG and Authorised FirmsG subject to the requirements in PIB Module, the DFSAG shall determine which of the sectoral rules in PIN section 8.3 and PIB section 7.3 shall apply in respect of the group.

          [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

          • PIN 8.3.2 Guidance

            1. The objective of PIN Rule 8.3.1(1)(a) is to avoid the necessity for multiple reporting of group capital adequacy.
            2. Where a Financial GroupG includes both InsurersG and entities subject to PIB, it is necessary to determine whether the Financial GroupG supervision applicable to the Financial GroupG should be that set out in PIN section 8.3 or PIB section 7.3. Normally, the DFSAG will exercise its power under PIN Rule 8.3.2 based on the relative size of the assets of the Financial InstitutionsG undertaking Insurance BusinessG (representing the insurance sector) and the assets of other Authorised FirmsG and Financial InstitutionsG (representing a combined non-insurance sector). Pure holding companies will be excluded as being in neither sector. The RulesG that will apply will be those of the sector with the larger total assets of the two. However, where the ratio of the assets of the two sectors differs by less than 1.5:1, the DFSAG will consider a request from the Authorised FirmsG in the Financial GroupG to apply the sectoral rules applicable to the smaller of the two sectors.
            [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 8.3.3

          An InsurerG must ensure at all times that its Financial Group Capital ResourcesG , as calculated in PIN Rule 8.3.5, are equal to or in excess of its Financial Group Capital RequirementG as calculated in PIN Rule 8.3.4.

          [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

          • PIN 8.3.3 Guidance

            If an InsurerG breaches PIN Rule 8.3.3, the DFSAG will take into account the full circumstances of the case including any remedial steps taken by another regulator or the Authorised FirmG , in determining what action it will take.

            [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • Financial group capital requirement

          • PIN 8.3.4

            (1) An InsurerG must calculate its Financial Group Capital RequirementG as the sum of the entity requirements calculated in accordance with (2) and (3);
            (2) Entity requirements for this purpose are:
            (a) an Authorised Firm'sG Capital RequirementG or Minimum Capital RequirementG calculated in accordance with the requirements of whichever of the PIB or PIN Module applies to that Authorised FirmG ;
            (b) in the case of regulated entities supervised by a regulator other than the DFSAG , then, with the written agreement of the DFSAG , the capital requirement of that entity; and
            (c) for other entities in the Financial GroupG , a notional capital requirement calculated as directed by the DFSAG .
            (3) Where an Authorised Firm'sG Financial GroupG includes an entity under (c) of the definition of Financial GroupG in the GLO Module, that Financial Institution'sG capital requirement is included on a proportionate basis.
            [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • Financial group capital resources

          • PIN 8.3.5

            (1) An InsurerG must calculate its Financial Group Capital ResourcesG by applying either of the following methods, excluding those amounts referred to in PIN Rule 8.3.6:
            (a) the accounting consolidation method which calculates the Adjusted Capital ResourcesG of the Financial GroupG based on the Financial Group'sG consolidated financial statements; or
            (b) the aggregation method, which is the sum of:
            (i) the Adjusted Capital ResourcesG of the ParentG of the Financial GroupG ;
            (ii) subject to (3), the Adjusted Capital ResourcesG calculated in accordance with the PIN Module, or the Capital ResourcesG calculated in accordance with the PIB module, as may be appropriate, of Financial InstitutionsG included in the Financial GroupG ; and
            (iii) subject to (3), the Financial Group'sG proportionate share of the Adjusted Capital ResourcesG calculated in accordance with the PIN Module, or the Capital ResourcesG calculated in accordance with the PIB Module, as may be appropriate, of Financial InstitutionG participations included in the Financial GroupG .
            (2) In calculating the Adjusted Capital ResourcesG of a member of the Financial GroupG or of the Financial GroupG , an InsurerG must follow the method of calculation set out in PIN section A3.2, with the exception that the deduction set out in PIN Rule A3.4.3(b) need not be made.
            (3) For the purposes of (1)(b)(ii) and (iii) an investment by one Financial GroupG member in another must not be included.
            [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]
            [Amended] DFSA RM50/2007 (Made 1st October 2007). [VER7/10-07]

            • PIN 8.3.5 Guidance

              1. The calculation of Financial Group Capital ResourcesG is subject to PIN section 3.5 which limits the amount of hybrid capital (including subordinated debt) that may be included in Adjusted Capital ResourcesG .
              2. In the calculation of Capital ResourcesG of Financial InstitutionsG that are Financial GroupG members in accordance with the PIB Module, an InsurerG applies to that member the deductions for illiquid assets and material holdings and Qualifying HoldingsG set out in the PIB Module.
              3. The deduction set out at PIN Rule 8.3.5(3) need not be made to the extent that the investment has already been excluded in whole or part by virtue of the application of the limits described in paragraphs 1 and 2 of this GuidanceG .
              [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

          • PIN 8.3.6

            When calculating the Financial Group Capital ResourcesG of a Financial GroupG , an InsurerG must not include Capital ResourcesG or Adjusted Capital ResourcesG (as the case may be) of SubsidiariesG or participations to the extent that those Capital ResourcesG or Adjusted Capital ResourcesG :

            (a) exceed the entity requirement in respect of that SubsidiaryG or participation, calculated in accordance with PIN Rule 8.3.4; and
            (b) are not freely transferable within the Financial GroupG .
            [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

            • PIN 8.3.6 Guidance

              1. Because the Financial Group Capital RequirementG set out in PIN Rule 8.3.4 includes capital requirements in respect of GroupG entities, capital resources may be included in the calculation of Financial Group Capital ResourcesG to the extent of those requirements. Capital that is surplus to those requirements is however subject to an additional condition before it may be taken into account for the purposes of Financial GroupG capital adequacy.
              2. In general, Capital ResourcesG or Adjusted Capital ResourcesG are considered not to be freely transferable if they are subject to a legal or constructive limitation on their transferability, whether that transfer would be made by dividend, return or capital or other form of distribution. Examples of relevant limitations might include obligations to maintain minimum capital requirements to meet domestic solvency requirements, or to comply with debt covenants.
              [Added] RM46/2007 (Made 5th July 2007). [VER6/07-07]

      • PIN 8.4 Transactions within a group

        • PIN 8.4.1

          This section applies to all InsurersG in respect of all transactions that are material.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]

          • PIN 8.4.1 Guidance

            A single transaction or series of connected transactions that constitute a sale, purchase, exchange, loan or extension of credit, investment or guarantee involving one-half of one percent (0.5%) or less of surplus as at the end of the reporting period immediately preceding the effective date of the transaction will not normally be considered material for the purposes of this section.


            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
            [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 8.4.2

          Transactions entered into by an InsurerG with RelatedG entities must comply with the following conditions:

          (a) the terms of the transactions must be fair and reasonable; and
          (b) the books, accounts and records of the InsurerG must clearly and accurately disclose the nature and details of the transactions including any accounting information necessary to support the fairness and reasonableness of the terms and conditions of the transactions.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]

      • PIN 8.5 Significant transactions other than group transactions

        • PIN 8.5.1

          (1) A DIFC Incorporated InsurerG must not enter into a transaction of the type described in this RuleG unless the directors of the InsurerG are satisfied following reasonable enquiry that the transaction does not adversely affect the interests of policyholders. The transactions to be considered are:
          (a) a sale, purchase, exchange, loan or extension of credit, guarantee or investment where the counterparty is a PersonG RelatedG to the InsurerG and the amount of the transaction equals or exceeds three per cent of the Insurer'sG surplus as at the end of the reporting period immediately preceding the transaction;
          (b) a loan or extension of credit to any PersonG who is not RelatedG to the InsurerG , where the InsurerG makes the loan or extension of credit with the agreement or understanding that the proceeds of the transaction, in whole or in substantial part, are to be used to make loans or extensions of credit to purchase assets of, or to make investments in, any RelatedG party of the InsurerG making the loans or extensions of credit, where the amount of the transaction equals or exceeds three per cent of the Insurer'sG surplus as at the end of the reporting period immediately preceding the transaction;
          (c) a reinsurance agreement or modification to a reinsurance agreement in which the reinsurance premium or a change in the InsurersG liabilities equals or exceeds five per cent of the Insurer'sG surplus;
          (d) a reinsurance agreement or modification to a reinsurance agreement involving the transfer of assets from an InsurerG to a PersonG not RelatedG to the InsurerG , if an agreement or understanding exists between the InsurerG and that PersonG that any portion of the assets will be transferred to one or more other PersonsG RelatedG to the InsurerG and the reinsurance premium or a change in the InsurersG liabilities equals or exceeds five per cent of the Insurer'sG surplus; and
          (e) any management agreement, service contract or cost-sharing arrangement.
          (2) For the purposes of (1), 'surplus' means:
          (a) in the case of an InsurerG that is not a Protected Cell CompanyG , the Insurer'sG Adjusted Capital ResourcesG ; and
          (b) in the case of an InsurerG that is a Protected Cell CompanyG , the Insurer'sG Adjusted Cellular Capital ResourcesG in respect of the CellG to which the transaction relates, where the transaction relates to a CellG , and otherwise the Insurer'sG Adjusted Non-Cellular Capital ResourcesG .
          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 8.5.2

          An InsurerG must report to the DFSAG all dividends and other distributions to shareholders within 21 days following the declaration of the dividend or distribution.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] DFSA RM42/2007 (Made 15th February 2007). [VER4/02-07]
          [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 8.5.3

          An InsurerG that is a Takaful InsurerG must report to the DFSAG all distributions of profit or surplus (however called or described) to policyholders within 21 days of the date of declaration of the distribution.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] DFSA RM42/2007 (Made 15th February 2007). [VER4/02-07]
          [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]

        • PIN 8.5.4

          An InsurerG must notify the DFSAG in writing within 30 days if the InsurerG makes an investment in a body corporate to which it is RelatedG , if the total investment in the RelatedG body corporate by the InsurerG and other bodies corporate to which the InsurerG is RelatedG exceeds ten per cent of the body corporate's paid-up capital or voting rights.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007). [VER6/07-07]

    • PIN 9 Insurers in Run-off

      • PIN 9.1 Introduction

        • PIN 9.1.1

          Subject to PIN Rule 9.1.2, chapter applies to all InsurersG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.1.2

          In the case of an InsurerG that is not a DIFC Incorporated InsurerG , this chapter applies only in respect of Insurance BusinessG carried on by the InsurerG through an establishment in the DIFCG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 9.1.2 Guidance

            1. This chapter sets out prudential provisions applying to InsurersG that cease to carry on Insurance BusinessG , either wholly or in respect of a particular Class of BusinessG . The provisions are also applicable to CellsG and Long-Term Insurance FundsG of InsurersG , but do not (because of the effect of PIN Rule 9.1.2) apply to non-DIFCG Insurance BusinessG of InsurersG that are not DIFC Incorporated InsurersG .
            2. Sections PIN 9.2 and PIN 9.3 set out actions that an InsurerG is required to take when it decides to cease to effect or carry out Contracts of InsuranceG . Sections PIN 9.4, PIN 9.5 and PIN 9.6 give the DFSAG specific powers relating to the supervision of such InsurersG .

            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.1.3

          For the purposes of this chapter, in determining whether an InsurerG is effecting Contracts of InsuranceG , or has ceased effecting Contracts of InsuranceG , including Contracts of InsuranceG effected through a CellG or a Long-Term Insurance FundG , Contracts of InsuranceG effected under a term of an existing Contract of InsuranceG must be ignored.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 9.1.3 Guidance

            The effect of PIN Rule 9.1.3 is to disregard, for the purposes of determining whether the chapter applies, Contracts of InsuranceG that are effected by the InsurerG , as a consequence of a term of an existing Contract of InsuranceG . A contract will normally only be regarded as being effected under a term of an existing contract if the InsurerG does not have discretion to decline to effect the new contract, or if it would be unreasonable for the InsurerG , having regard to the interests of the policyholder, to decline to effect it.


            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.1.4

          In this chapter:

          (a) an InsurerG in run-off means an InsurerG that has ceased to effect Contracts of InsuranceG in respect of the whole of its Insurance BusinessG (or, in the case of an InsurerG that is not a DIFC Incorporated InsurerG , the whole of its Insurance BusinessG carried on through an establishment in the DIFCG ), and a CellG in run-off and a Long-Term Insurance FundG in run-off are construed accordingly; and
          (b) going into run-off or placing Insurance BusinessG into run-off means ceasing to effect Contracts of InsuranceG , and placing a CellG or a Long-Term Insurance FundG into run-off are construed accordingly.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 9.2 Insurers ceasing to effect contracts of insurance in a class of business

        • PIN 9.2.1

          This section applies to an InsurerG that ceases or decides to cease to effect new Contracts of InsuranceG :

          (a) in a Class of BusinessG in which the InsurerG has previously carried on Insurance BusinessG ; or
          (b) in respect of a CellG or a Long-Term Insurance FundG , in a Class of BusinessG in which the InsurerG has previously carried on Insurance BusinessG through that CellG or Long-Term Insurance FundG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.2.2

          An InsurerG to which this section applies must, within 28 days of a decision to cease to effect new Contracts of InsuranceG in a Class of BusinessG , notify the DFSAG of its decision, in a written notice specifying the following details:

          (a) the effective date of the decision to cease effecting Contracts of InsuranceG ;
          (b) the Class of BusinessG to which the decision relates; and
          (c) where relevant, the CellG or Long-Term Insurance FundG to which the decision relates.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.2.3

          An InsurerG which has provided a notice to the DFSAG in accordance with PIN Rule 9.2.2 must not effect any Contracts of InsuranceG in that Class of BusinessG without the written permission of the DFSAG . Where the notice referred to in PIN Rule 9.2.2 relates to a CellG or Long-Term Insurance FundG of the InsurerG , the restriction set out in this rule applies only to that CellG or Long-Term Insurance FundG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 9.3 Run-off plans

        • PIN 9.3.1

          This section applies to:

          (a) InsurersG that are in run-off or that maintain CellsG or Long-Term Insurance FundsG that are in run-off;
          (b) InsurersG that go into run-off or that place CellsG or Long-Term Insurance FundsG into run-off;
          (c) InsurersG that make a decision to go into run-off or to place a CellG or Long-Term Insurance FundG into run-off; and
          (d) InsurersG whose permission to effect Contracts of InsuranceG in respect of their entire Insurance BusinessG or in respect of the entire business of a CellG or Long-Term Insurance FundG is withdrawn by the DFSAG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.3.2

          If an InsurerG takes a decision to go into run-off or to place a CellG or a Long-Term Insurance FundG into run-off, the InsurerG must, at the same time as the notice referred to in PIN Rule 9.2.2, provide the DFSAG with a written run-off plan in respect of the Insurance BusinessG being placed into run-off.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.3.3

          If the DFSAG withdraws an Insurer'sG permission to effect Contracts of InsuranceG in respect of the Insurer'sG entire Insurance BusinessG or the entire Insurance BusinessG of a CellG or Long-Term Insurance FundG , the InsurerG must, within 28 days of the written notice of withdrawal of permission (or, if later, the period specified in that notice), provide the DFSAG with a written run-off plan in respect of that Insurance BusinessG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.3.4

          A run-off plan provided to the DFSAG in accordance with this section must cover the period until all liabilities to policyholders relating to the Insurance BusinessG in run-off are met and must include:

          (a) an explanation of how, or to what extent, all liabilities to policyholders will be met in full as they fall due;
          (b) an explanation of how, or to what extent, the InsurerG will maintain its compliance with the requirements of PIN chapter 4 until such time as all liabilities to policyholders are met;
          (c) a description, appropriate to the scale and complexity of the Insurer'sG business, of the Insurer'sG business strategy;
          (d) financial projections showing, in a form appropriate to the scale and complexity of the Insurer'sG operations, the forecast financial position of the InsurerG as at the end of each reporting period during the period to which the run-off plan relates; and
          (e) an assessment of the sensitivity of the financial position of the InsurerG to stress arising from realistic scenarios relevant to the circumstances of the InsurerG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.3.5

          Where an Insurer'sG Insurance BusinessG in run-off relates to a CellG or a Long-Term Insurance FundG of that InsurerG , the run-off plan must deal with the matters set out in PIN Rule 9.3.4 so far as they relate to that CellG or Long-Term Insurance FundG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.3.6

          An InsurerG that has provided a written run-off plan to the DFSAG must monitor the matters contained in the run-off plan and must notify the DFSAG promptly and in writing of any significant departure from the run-off plan.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 9.3.6 Guidance

            An InsurerG should decide whether a matter constitutes a significant departure from a run-off plan, having regard to the nature and size of the matter and its materiality relative to the size and complexity of the InsurerG and, where relevant, the size and complexity of the CellG or Long-Term Insurance FundG concerned. The following matters will normally be considered as representing a significant departure from a run-off plan:

            a. significant revision of the Insurer'sG strategy for managing risks, and in particular its strategy for the use of reinsurance;
            b. a significant deterioration in the Insurer'sG claims experience, financial position or solvency position (the amount by which the Insurer'sG capital resources, determined in accordance with the provisions of PIN chapter 4 relevant to that InsurerG , exceed the applicable minimum capital requirements set out in that chapter); or
            c. any other transaction or circumstance that is likely to have a material effect upon the Insurer'sG solvency position.

            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.3.7

          Where an InsurerG has notified a matter to the DFSAG in accordance with PIN Rule 9.3.6, the DFSAG may by notice in writing require the InsurerG to provide an amended run-off plan. The InsurerG must provide an amended run-off plan within 28 days of receipt of the notice, unless the notice specifies a longer period.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 9.4 Requirements for collateral for insurers in run-off

        • PIN 9.4 Guidance

          This section contains provisions that enable the DFSAG to require an InsurerG that is in run-off or going into run-off to post collateral assets or make equivalent arrangements by letter of credit, to support the Insurance LiabilitiesG and Minimum Capital RequirementsG applicable to the InsurerG . In considering whether to exercise the powers in this section, the DFSAG will have regard to the circumstances of the InsurerG and the interests of policyholders.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.4.1

          This section applies only to an InsurerG that:

          (a) is in run-off as regards its entire Insurance BusinessG or the entire Insurance BusinessG of a CellG or Long-Term Insurance FundG ;
          (b) has provided a notice to the DFSAG in accordance with PIN Rule 9.2.2 in respect of its entire Insurance BusinessG or the entire Insurance BusinessG of a CellG or Long-Term Insurance FundG ; or
          (c) has received a written notice from the DFSAG withdrawing the Insurer'sG permission to effect Contracts of InsuranceG in respect of its entire Insurance BusinessG or the entire Insurance BusinessG of a CellG or Long-Term Insurance FundG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.4.2

          The DFSAG may, by written notice (referred to in this chapter as a 'collateral notice') require an InsurerG to make available assets:

          (a) of a type and in a manner described in PIN Rule 9.4.6; and
          (b) having a value, determined in accordance with the provisions of PIN chapter 5, of the lower of:
          (i) the amount, if any, specified in the notice; and
          (ii) the amount determined in accordance with PIN Rule 9.4.5.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.4.3

          An InsurerG must comply with the requirements of a collateral notice within the period (if any) specified in the notice, or within two months of the date of the notice, whichever is the longer.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.4.4

          The DFSAG may at any time, by written notice to the InsurerG , vary or revoke a collateral notice issued under PIN Rule 9.4.2.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.4.5

          The amount referred to in PIN Rule 9.4.2(b)(ii) is calculated as follows:

          (a) in the case of an InsurerG that is not a DIFC Incorporated InsurerG , the amount of the assets that the InsurerG is required by PIN Rule 4.7.2 to make available;
          (b) in the case of a CellG of an InsurerG , the sum of the following two amounts:
          (i) the Insurance LiabilitiesG attributable to that CellG ; and
          (ii) the Minimum Cellular Capital RequirementG applicable to that CellG .
          (c) in the case of a Long-Term Insurance FundG , subject to (e) and (f), the sum of the following two amounts:
          (i) the Insurance LiabilitiesG attributable to that Long-Term Insurance FundG ; and
          (ii) the Minimum Fund Capital RequirementG applicable to that Long-Term Insurance FundG ;
          (d) in the case of an InsurerG that is a DIFC Incorporated InsurerG and that is not a Protected Cell CompanyG , the sum of the following two amounts:
          (i) the Insurer'sG Insurance LiabilitiesG ; and
          (ii) the Insurer'sG Minimum Capital RequirementG .
          (e) in the case of an InsurerG to which (a) and (c) both apply, the amount set out in (a); and
          (f) in the case of an InsurerG to which (c) and (d) both apply, the amount set out in (d).
          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007) [VER6/07-07]

          • PIN 9.4.5 Guidance

            PIN Rule 9.4.5 describes the maximum amount of assets that the DFSAG may require to be made available as collateral. The RuleG includes provisions to avoid imposing multiple collateral requirements on the same InsurerG in respect of the same Insurance BusinessG in run-off.


            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.4.6

          The assets referred to in PIN Rule 9.4.2 must be made available in one of the following two manners or in a combination of those two manners:

          (a) assets of a type described in PIN Rule 4.7.3 may be deposited with a custodian nominated or approved in writing by the DFSAG ; or
          (b) a financial institution nominated or approved in writing by the DFSAG may issue a confirmed letter of credit in favour of the DFSAG , for the amount of the assets required to be made available.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.4.7

          The terms and conditions of a custody arrangement referred to in PIN Rule 9.4.6(a) or a letter of credit referred to in PIN Rule 9.4.6(b) and any change to those terms and conditions, must be notified to the DFSAG , which may within two months of such notification require the InsurerG to make any change to the terms and conditions of the arrangement or letter of credit.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN 9.4.7 Guidance

            The terms and conditions of an arrangement or letter of credit will normally be expected to include provisions having the following effect:

            a. the arrangement or letter of credit is not revocable or cancellable at the option of the InsurerG , and contains no provision for automatic cancellation on the insolvency of the InsurerG ;
            b. the DFSAG has the right to apply assets deposited, or to draw upon the letter of credit, for the purpose of meeting Insurance LiabilitiesG of the InsurerG and any expenses incidental to that activity;
            c. in the case of a custody arrangement, the InsurerG is prohibited from applying, directly or indirectly, the assets deposited, except in the following manners:
            i. in settlement of Insurance LiabilitiesG of the InsurerG that are in respect of the Insurance BusinessG that is in run-off;
            ii. in exchange for fair value, for other assets of a type described in PIN Rule 4.7.3 and deposited with the same custodian under the same conditions;
            iii. in consideration for the transfer to another InsurerG of Insurance LiabilitiesG of the InsurerG that are in respect of the Insurance BusinessG that is, or has been placed into, run-off;
            iv. withdrawal from the custody of the custodian for deposit with a different custodian approved by the DFSAG ;
            v. withdrawal from the custody of the custodian in accordance with PIN Rule 9.4.12; or
            vi. withdrawal from the custody of the custodian in accordance with a written notice issued by the DFSAG revoking or varying the collateral notice; and
            d. in the case of a letter of credit, the amount of the letter of credit may be reduced only:
            i. in order to achieve, in accordance with PIN Rule 9.4.12 a reduction in the amount of assets made available by the InsurerG ; or
            ii. in accordance with a written notice issued by the DFSAG revoking or varying the collateral notice.

            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.4.8

          The DFSAG may, by written notice to an InsurerG , require the InsurerG to charge in favour of the DFSAG part or all of any assets deposited with a custodian in accordance with PIN Rule 9.4.6(a).


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.4.9

          The InsurerG must reassess, as at the end of March, June, September and December in each year, the amount of the assets that the InsurerG is required by a collateral notice to make available, and the amount of assets made available by the InsurerG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.4.10

          The InsurerG must report to the DFSAG , within two months of the date as at which the reassessment referred to in PIN Rule 9.4.9 is performed, the results of that reassessment and details of any action taken or proposed to be taken as a result of that assessment.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.4.11

          If the reassessment referred to in PIN Rule 9.4.9 shows that the amount of assets made available is less than the amount that the InsurerG is required to make available, the InsurerG must, within two months of the effective date of the reassessment, make additional assets available so that the InsurerG complies with the requirements of the collateral notice.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.4.12

          If the reassessment shows that the amount of assets made available is more than the amount that the InsurerG is required to make available, the InsurerG may, with the written consent of the DFSAG , remove assets from those made available provided that the InsurerG complies with the requirements of the collateral notice after the assets have been removed.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 9.5 Provisions in respect of contracts relating to insurance business in run-off

        • PIN 9.5.1

          This section applies to any InsurerG referred to in PIN Rule 9.4.1.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.5.2

          An InsurerG to which this section applies must inform the DFSAG in writing of the existence and principal features of any contract which it enters into in respect of its Insurance BusinessG in run-off, including Insurance BusinessG carried on through a CellG or a Long-Term Insurance FundG that is in run-off, or that is in existence at the time the InsurerG places that Insurance BusinessG into run-off, and that is of any of the following types:

          (a) contracts, other than Contracts of InsuranceG effected by the InsurerG prior to going into run-off, with parties that are RelatedG to the InsurerG ;
          (b) contracts relating to the management of the Insurance BusinessG in run-off, and any other contracts with the same counterparty or parties RelatedG to that counterparty; or
          (c) contracts for reinsurance of the Insurance BusinessG that is in run-off, and any other contracts with the same counterparty or parties RelatedG to that counterparty.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN 9.5.3

          The DFSAG may by written notice require an InsurerG to provide additional information as specified in that notice in respect of any contract notified to the DFSAG in accordance with PIN Rule 9.5.2


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN 9.6 Limitations on distributions by DIFC incorporated insurers in run-off

        • PIN 9.6.1

          No DIFC Incorporated InsurerG that is in run-off may make any distribution of profits or surplus however called or described, or return of capital, or any payment of management fees (other than fees payable under a contract notified to the DFSAG in accordance with PIN Rule 9.5.2), without the written consent of the DFSAG . Any such distribution or return of capital or payment of management fees must be made within the period, if any, specified in the written notice of consent given by the DFSAG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

    • PIN 10 Insurance Special Purpose Vehicles

      • PIN 10.1 Application

        • PIN 10.1.1

          This chapter applies only to InsurersG that are Authorised ISPVsG .

          [Added] DFSA RM48/2007 (Made 1st October 2007). [VER7/10-07]

        • PIN 10.1.2

          An Authorised ISPVG must ensure that at all times its assets are equal to or greater than its liabilities.

          [Added] DFSA RM48/2007 (Made 1st October 2007). [VER7/10-07]

          • PIN 10.1.2 Guidance

            It is the policy of the DFSAG that an Authorised ISPVG should be fully funded. The DFSAG considers that to be fully funded an ISPVG must have actually received the proceeds of the debt issuance or other mechanism by which it is financed. The DFSAG would not, for example, authorise an ISPVG where part of the financing for its reinsurance liabilities was on a contingent basis, i.e. a stand by facility or letter of credit.

            [Added] DFSA RM48/2007 (Made 1st October 2007). [VER7/10-07]

        • PIN 10.1.3

          The assets of an Authorised ISPVG must be held by, or on behalf of:

          (a) the Authorised ISPVG ; or
          (b) the insurer which cedes to the Authorised ISPVG the risks in respect of which the relevant assets are held.

          [Added] DFSA RM48/2007 (Made 1st October 2007). [VER7/10-07]

        • PIN 10.1.4

          An Authorised ISPVG must develop, implement and maintain a risk management system to address all material risks to which it is subject. In particular, it must have regard to the GuidanceG on managing investment risk set out in section A.2.6.

          [Added] DFSA RM48/2007 (Made 1st October 2007). [VER7/10-07]

          • PIN 10.1.4 Guidance

            In developing, implementing and maintaining a risk management system as required under PIN Rule 10.1.4 an Authorised ISPVG should have proper regard to the GuidanceG on investment risk set out in section A2.6.

            [Added] DFSA RM48/2007 (Made 1st October 2007). [VER7/10-07]

        • PIN 10.1.5

          An Authorised ISPVG must include in each of its contracts of reinsurance terms which ensure that its aggregate maximum liability at any time under those contracts of reinsurance does not exceed the amount of its assets at that time.

          [Added] DFSA RM48/2007 (Made 1st October 2007). [VER7/10-07]

        • PIN 10.1.6

          An Authorised ISPVG must ensure that under the terms of any debt issuance or other financing arrangements used to fund its reinsurance liabilities the rights of the providers of that debt or other financing are fully subordinated to the claims of creditors under its contracts of reinsurance.

          [Added] DFSA RM48/2007 (Made 1st October 2007). [VER7/10-07]

        • PIN 10.1.7

          An Authorised ISPVG must only enter into contracts or otherwise assume obligations which are necessary for it to give effect to the reinsurance arrangements which represent the special purpose for which it has been established.

          [Added] DFSA RM48/2007 (Made 1st October 2007). [VER7/10-07]

        • PIN 10.1.8

          Where the Authorised ISPVG is a Protected Cell CompanyG , PIN Rules 10.1.2 to 10.1.7 should be read as applying to each CellG individually.

          [Added] DFSA RM48/2007 (Made 1st October 2007). [VER7/10-07]

    • PIN App1 Guide to the Appendices

      • PIN A1.1 Guide to the appendices

        • PIN A1.1 Guidance

          1. In PING , appendices have been used to present detailed material which would otherwise break up the flow of the main text.
          2. PIN App2 presents detailed GuidanceG on systems and controls issues particularly relevant to InsurersG .
          3. The remaining appendices are all concerned with capital adequacy calculations and reporting.
          4. A fundamental requirement of PIN chapter 4 of the RulesG is that an Insurer'sG capital resources should be at least equal to its capital requirement.
          5. PIN App3 contains the RulesG for the calculation of an Insurer'sG capital resources, for a normally structured InsurerG . PIN App5 and PIN App7 contain the corresponding rules for a Protected Cell CompanyG and a segregated Long-Term Insurance FundG respectively.
          6. PIN App4 contains the RulesG for the calculation of an Insurer'sG capital requirement, for a normally structured InsurerG . PIN App6 and PIN App8 contain the corresponding rules for a Protected Cell CompanyG and a segregated Long-Term Insurance FundG respectively. They make frequent reference to PIN App4.
          7. PIN App9 contains the rules for the calculation of the DIFC Business Risk Capital RequirementG referred to in PIN Rule 4.7.2(d). It is only applicable to InsurersG incorporated outside the DIFCG .
          8. PRU and PIN App10 contain financial reporting forms, and specifies how they must be completed.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended][VER3/08-06]
          [Amended] DFSA RM44/2007 (Made 1 June 2007). [VER5/06-07]

    • PIN App2 Management and Control of Risk

      • PIN A2.1 Introduction

        • PIN A2.1 Guidance

          1. This GuidanceG relates to the RulesG on management and control of risk contained in PIN chapter 2. It has been prepared to assist directors of InsurersG , their Auditors, and others concerned in applying those RulesG .
          2. The RulesG in PIN chapter 2 require an InsurerG to address specific areas of risk, as well as maintain a generally sound risk management system. InsurersG have some flexibility in their approach to these requirements.
          3. This appendix provides some general comment on the objectives of the RulesG , risk management and control mechanisms. It also provides specific comment on the following selected aspects of the five broad areas of risk identified in PIN section 2.3, that are considered to be of particular relevance to Insurers:
          a. Balance sheet and market risk components:
          i. reserving risk;
          ii. investment risk (including risks associated with the use of derivatives);
          iii. underwriting risk;
          iv. claims management risk;
          v. product design and pricing risk; and
          vi. liquidity management risk;
          b. Credit quality risk;
          c. Non-financial or operational risk components:
          i. business continuity planning risk; and
          ii. outsourcing risk;
          d. Reinsurance risk; and
          e. GroupG risk.
          4. It is not the purpose of this appendix to provide guidance in areas that are common to all or many Authorised FirmsG other than InsurersG . The principal objective is to address areas that are of specific relevance to InsurersG .
          5. The procedures set out in this appendix do not constitute a checklist of necessary procedures. An InsurerG cannot assume that implementing all of the procedures set out in this appendix will guarantee that the InsurerG complies with the requirements to which it is subject.
          6. Since this appendix is not intended to be prescriptive or exhaustive, it cannot be regarded as a substitute for reading the RulesG themselves and taking professional advice. An InsurerG should contact the DFSAG if there are any areas which it would like to discuss further.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN A2.2 Objectives of the rules

        • PIN A2.2 Guidance

          1. The objective of the RulesG contained in PIN chapter 2 is that InsurersG should control their own risks through sound and prudent risk management systems, such as to minimise the likelihood that events, internal or external to the InsurerG , cause the InsurerG to fail financially or operationally.
          2. The risk management systems required by the RulesG should be integrated with the operational processes of a business. InsurersG are expected to instil a strong risk control culture throughout their operations, so that material risks and potential problems that emerge can be identified, managed and promptly resolved in the normal course of business operations. The absence of such a control culture is likely to be taken as evidence that more specific control objectives are unlikely to be attained.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN A2.3 Risk management systems

        • PIN A2.3 Guidance

          1. The RulesG require an InsurerG to develop, implement and maintain sound and prudent risk management systems, appropriate to the size, business mix and complexity of the Insurer'sG operations. The responsibility for ensuring compliance lies with the Governing BodyG and senior management of the InsurerG .
          2. The nature and extent of the systems and controls which an InsurerG will need to maintain will depend upon a variety of factors including:
          a. the nature, size and complexity of its business;
          b. the diversity of its operations, including geographical diversity;
          c. the volume and size of its transactions; and
          d. the degree of risk associated with each area of its operations.
          3. To enable it to comply with its obligation to maintain appropriate systems and controls, an InsurerG should regularly review its management of risk in the context of relevant environmental and operational factors and changes in those factors
          4. The RulesG lay down certain minimum processes and procedures that must be maintained by InsurersG . These include a written risk management strategy, risk management policies and procedures, and allocated responsibilities and controls.
          5. The risk management strategy should cover not only the identification, assessment, control and monitoring of risks but also contingency plans to deal with the crystallisation of risks or adverse developments in important areas of risk. This will be assisted by stress and scenario testing tailored to the risk characteristics of the Insurer.
          6. While the risk management systems of an InsurerG must address all material risks, PIN section 2.3 lays down specific requirements for an InsurerG to maintain risk management systems in respect of the following areas:
          a. balance sheet and market risk;
          b. credit quality risk;
          c. non-financial or operational risk;
          d. reinsurance risk; and
          e. GroupG risk.
          7. An InsurerG should have regard to the need for adequate risk management systems at the level of any GroupG the InsurerG is a member of (subject to exemptions for GroupsG that are intermediate GroupsG or GroupsG that are headed by InsurersG , in which case the holding company is already subject to the risk management requirements in its own right). The InsurerG bears a responsibility to take reasonable actions to ensure that the GroupG as a whole complies with the risk management requirements of the RulesG . Although an InsurerG may not be in a position to control the risk management systems of the GroupG , GroupG risk management systems are likely to have a material impact on the exposure of the InsurerG to risks arising from its membership of the GroupG .
          8. Further considerations in respect of GroupG risk generally are contained in PIN section A2.5.
          9. The RulesG do not prohibit an InsurerG from outsourcing its risk management systems. Where the InsurerG is a member of a GroupG , it may be practicable for some processes to be performed on a GroupG -wide basis. An InsurerG would not normally outsource risk management systems outside the GroupG . However the InsurerG remains responsible under the RulesG for the adequacy of its risk management systems, whether or not those processes are outsourced. Senior management cannot delegate their regulatory responsibility for ensuring that the Insurer'sG risk management systems are adequate. The fact that a system is partially or wholly outsourced would be a factor in the Insurer'sG assessment of whether the system was adequate. To decide whether any system is adequate, senior management would be expected to have assessed the design and operation of the system, including the design and the operations of controls over outsourcing decisions and monitoring. Because an InsurerG must be in a position to demonstrate that it has complied with its regulatory requirements, adequate documentary evidence of these assessments should be maintained.
          10. Further considerations in respect of outsourcing generally are contained in PIN A2.13.
          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended]DFSA RM43/2007 (Made 1st June 2007). [VER14/06-07]

      • PIN A2.4 Control mechanisms

        • PIN A2.4 Guidance

          1. An InsurerG should have appropriate control mechanisms in place to ensure that the policies and procedures established for risk management are adhered to at all times.
          2. Control mechanisms would normally include:
          a. clearly defined management responsibilities;
          b. adequate segregation of duties;
          c. a risk committee or audit function to establish and maintain the control processes;
          d. a system of approvals, limits, authorisations and reporting lines;
          e. policies to document the Insurer'sG procedural controls;
          f. activity controls for each division or department;
          g. verifications of activities such as underwriting, pricing and claims management, and reconciliations of relevant data
          h. reviews by Governing BodyG , senior management and internal audit; and
          i. physical controls.
          3. The directors should monitor the overall effectiveness of the Insurer'sG risk management systems. Depending on the size and complexity of operations of an InsurerG , risk management systems may be monitored on an ongoing or periodic basis. At a minimum there should be periodic internal audits with results being reported directly to the Governing BodyG and senior management.
          4. Where deficiencies are identified as part of the monitoring process or internal audit, these should be reported in a timely manner to the appropriate management and addressed. Material deficiencies should be reported to the Governing BodyG and senior management. A material deficiency can result not only from a single deficiency, but also from a number of small deficiencies that, when considered together, amount to a material deficiency.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN A2.5 Reserving risk

        • PIN A2.5 Guidance

          1. Reserving risk is the risk that Insurance LiabilitiesG recorded by the InsurerG , net of reinsurance and other recoveries in respect of those liabilities, will be inadequate to meet the net amount payable when the Insurance LiabilitiesG crystallise. Insurance LiabilitiesG include the liability for claims incurred up to the reporting date, as well as the Premium LiabilityG . In the case of General InsuranceG , reinsurance recoveries anticipated in respect of those liabilities are generally recognised as a separate asset. In the case of Long-Term InsuranceG , Insurance LiabilitiesG include also the net value of future Policy BenefitsG and the effects of reinsurance arrangements are taken into account when these are estimated.
          2. An Insurer'sG risk management system should therefore include a process for ongoing review and appraisal of the Insurance LiabilityG valuation framework (i.e. assumptions made, reinsurance recoveries estimated etc). In conducting this review, consideration should be given to emerging pricing and claim payment trends.
          3. An InsurerG should maintain appropriate systems, controls and procedures to ensure that the provision for Insurance LiabilitiesG is, at all times, sufficient to cover any liabilities that have been incurred, or are yet to be incurred on Contracts of InsuranceG accepted by the InsurerG , as far as can be reasonably estimated.
          4. Appropriate methods should be applied in estimating the provision for Insurance LiabilitiesG , including provisions in respect of individual notified incurred claims. In determining a provision estimation method, managers may consider using alternative approaches before selecting those which may be regarded as most appropriate to the nature of the business.
          5. Appropriate methods should be applied in estimating the amount of the asset in respect of reinsurance recoveries that are expected to arise on crystallisation of the gross Insurance LiabilitiesG . The manner of estimating those assets should be consistent with the manner estimating the gross liabilities, except where there is a sound justification for doing otherwise.
          6. Suitable systems and controls should be put in place to ensure that the selected approaches are applied accurately and on a consistent basis.
          7. Procedures should be in place to review and monitor, on a regular basis, the out-turn of provisions made in previous years for Insurance LiabilitiesG , both gross and net of reinsurance recoveries.
          8. An InsurerG is required by PIN chapter 7 to obtain an annual report by an ActuaryG on the valuation of its Insurance LiabilitiesG and associated assets. The RulesG do not require the performance of an actuarial valuation at other times, however an InsurerG should consider the use of actuaries or other appropriately qualified and experienced loss reserving specialists to estimate Insurance LiabilitiesG periodically through the year. The InsurerG should in any case undertake periodic testing of its reserving processes and the level of its reserves, including continual reassessment of assumptions used, and testing the sensitivity of the valuation of Insurance LiabilitiesG to stress arising from realistic scenarios relevant to the circumstances of the InsurerG . Whether in-house or outside experts are used, appropriate procedures should be in place to ensure that the specialist selected possesses the appropriate level of skill and experience and has available the necessary information to carry out the estimation required.
          9. Suitable controls should be in place to ensure that the data used in determining the Insurance LiabilitiesG are extracted from the underlying records accurately and to the necessary level of detail. The level of detail should be sufficient to ensure that the data available to managers in their assessment of Insurance LiabilitiesG covers the whole of its liabilities and exposures under insurance contracts.
          10. Scenario testing should cover a period of several years into the future, particularly in the case of an InsurerG carrying on Long-Term Insurance BusinessG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN A2.6 Investment risk

        • PIN A2.6 Guidance

          1. Investment risk refers to the possibility of an adverse movement in the value of an Insurer'sG on-balance sheet assets or certain off-balance sheet obligations. Investment risk derives from a number of sources including market risk (e.g. equity, interest rate and foreign exchange risk), credit quality risk (dealt with separately in this appendix), investment concentration risk and asset and liability mismatch risk (e.g. in terms of currency, maturity, and location). Associated risks include political risk, e.g. the risk of inability to realise assets in a particular location, and the risk of correlation such that a single event has adverse impacts on both assets and liabilities. Investment risk includes risk associated with the use of derivatives and other complex investment instruments, including asset backed securities, credit linked notes and insurance linked notes.
          2. Suitable controls and management information systems should be in place to enable an InsurerG to implement an appropriate investment strategy.
          3. Appropriate procedures should be in place to enable an InsurerG to monitor the interaction of its assets and liabilities so as to ensure that exposure to equity, interest rate and foreign exchange risk is contained within limits approved by the InsurerG . Procedures should include testing of sensitivity to realistic scenarios that are relevant to the circumstances of the InsurerG .
          4. Appropriate procedures should be in place to enable an InsurerG to monitor the location of its assets and liabilities, so as to ensure that risk of localisation mismatch is contained within limits approved by the InsurerG . Procedures should include testing of sensitivity to realistic scenarios, including political risk scenarios that are relevant to the circumstances of the InsurerG .
          5. InsurersG should remain alert to the need to consider asset and liability risks on an integrated basis. Systems should not consider only risks taken in isolation, but should consider how even when individual risks are addressed, combinations of circumstances may still expose an InsurerG to loss. This is of particular relevance where a single outcome is exposed to more than one risk, for example where assets need to be available not only in a particular location but also in a specific currency.
          6. Appropriate procedures should be in place for assessing the credit-worthiness of counterparties to whom the InsurerG is significantly exposed. Further guidance in this area is provided in PIN A2.11.
          7. Appropriate procedures should be in place for setting prudent limits for the Insurer'sG aggregate exposure to certain categories of asset. Such limits should take account of the suitability of assets covering Insurance LiabilitiesG . They may take account of the Insurer'sG other assets bearing in mind the possibility that such assets might in future be needed to meet Insurance LiabilitiesG .
          8. The investment strategy should be reflected in clear terms of reference from the InsurerG to its investment managers, who should be qualified and competent to carry out their assigned task. The work of the investment managers should be monitored sufficiently closely by management to ensure that the Insurer'sG strategy is being followed and that the systems are effective.
          9. InsurersG should ensure that controls over derivatives and other complex investment instruments have been implemented and are adequate to ensure that risks are properly assessed, regularly reviewed in the light of changing market conditions and experience, and consistent with the overall investment strategy decided upon and approved by the InsurerG . In particular senior management and directors of InsurersG should:
          a. fully understand the nature of derivatives trading and trading in any other complex investment instruments being undertaken by the organisation and the related risks, and where relevant, are suitably qualified and competent to transact the range and type of transactions being undertaken and understand the nature of the exposures (including both counterparty and market risk) which their use will create;
          b. have documented clearly the objectives and policies for the use of derivatives contracts and other complex investment instruments, and monitor their use (including by way of compliance audits of investment managers) to ensure their use is in line with those objectives and policies. InsurersG should ensure that policies are sufficiently clear and precise to ensure that new types of instrument are not dealt in without due prior consideration. They should also define any associated limits on exposures or volumes that are considered appropriate;
          c. have due regard to uncovered transactions in the context of the above controls so that in no circumstances is the Insurer'sG capital adequacy endangered. Systems should be adequate to prevent exposure to unacceptable, exceptionally volatile risks and to monitor transactions with a frequency commensurate with volatility and risk. The systems should trigger a hedge or close out a transaction whenever adverse movements or events threaten a significant worsening of the Insurer'sG capital adequacy position;
          d. have ensured that those who have responsibility for the control investments in of derivatives and other complex instruments, are sufficiently independent of the day-to-day operators to ensure effective control;
          e. be capable of analysing and monitoring the risk of all transactions undertaken by the InsurerG individually and in aggregate (including interest rate risk, foreign exchange risk, fraud, error, unauthorised access to information and other operational risks);
          f. be provided regularly with appropriate statistics and information on the trading volumes of derivatives contracts by type of product including regular reports of all off-balance sheet transactions, contingencies and commitments;
          g. be satisfied that sufficient systems and controls relevant to derivative products and other complex investment instruments have been put in place, including independent agreement and reconciliation of positions, independent checking of prices, appropriate authorisation where dealing limits have been exceeded, etc; and
          h. have tested adequately and approved valuation models which are used to value open positions and derivative contracts and other complex investment instruments, including controls preventing unauthorised programme amendments. Such models should include appropriate testing of the robustness of the portfolio in changing investment conditions, using realistic scenarios relevant to the circumstances of the InsurerG .
          10. Stress and scenario testing should consider the impact of possible deteriorations in investment conditions, including where relevant the impact of simultaneous deteriorations in more than one market. It should also consider effects on liquidity, including where relevant those from an inability to repatriate assets from elsewhere. Where the insurance industry's holdings are large in relation to the turnover of the domestic market, scenario modelling should take account of the possible effect on the market of simultaneous liquidation of assets.
          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] DFSA RM43/2007 (Made 1st June 2007). [VER5/06-07]
          [Amended] DFSA RM99/2012 (Made 24th July 2012) [VER12/07-12]

      • PIN A2.7 Underwriting risk

        • PIN A2.7 Guidance

          1. Underwriting is the process by which an InsurerG determines whether and under what conditions to accept a risk. Weaknesses in the systems and controls surrounding the underwriting process can expose an InsurerG to the risk of unexpected losses which may threaten the capital adequacy of the InsurerG .
          2. The risk management system for underwriting risk should normally include at least the following policies and procedures:
          a. clear identification and quantification of the Insurer'sG willingness and capacity to accept risk;
          b. clear identification of the classes and characteristics of insurance business that the InsurerG is prepared to underwrite including:
          i. geographical areas;
          ii. the types of risk that may be underwritten; and
          iii. criteria for the use of policy exclusions and reinsurance;
          c. formal evaluation processes for the effective assessment of risks underwritten including:
          i. criteria for assessing risk;
          ii. methods for monitoring emerging experience; and
          iii. methods by which emerging experience is taken into account in updating the underwriting process;
          d. appropriate approval authorities and limits to those authorities that are definitive and specific (including controls surrounding any delegations that are given to intermediaries of the InsurerG );
          e. concentration limits; and
          f. methods for monitoring compliance with underwriting policies and procedures such as:
          i. minimum standards of documentation;
          ii. internal audit;
          iii. peer review of policies underwritten;
          iv. assessments of brokers' procedures and systems to ensure the quality of information provided to the InsurerG is of a suitable standard; and
          v. in the case of reinsurers, audits of ceding companies to ensure that reinsurance assumed is in accordance with treaties in place.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN A2.8 Claims management risk

        • PIN A2.8 Guidance

          1. Claims management is the process by which InsurersG fulfil their contractual obligation to policyholders. An Insurer'sG duties when a claim is made under a Contract of InsuranceG may be summarised as:
          a. verify the contractual obligation to pay the claim;
          b. make an assessment of the amount and incidence of the claim liability, including loss adjustment expenses; and
          c. manage the claim settlement process.
          2. The risk management system for claims management risk should normally include at least the following policies and procedures:
          a. clear definition and appropriate levels of delegations of authority;
          b. clear claim settlement procedures, including claim determination and investigation procedures and the criteria for accepting or rejecting claims;
          c. clear and objective loss estimation procedures (including estimation of reinsurance recoveries); and
          d. methods for monitoring compliance with claims management processes and procedures such as:
          i. minimum documentation standards;
          ii. internal audit;
          iii. peer review of claims paid;
          vi. assessment of brokers' procedures and systems to ensure the quality of information provided to the InsurerG is of a suitable standard; and
          vii. audits of ceding companies to ensure that the value of claims paid is in accordance with treaties in place.
          3. In establishing and maintaining effective claims handling systems and procedures, senior management of InsurersG should consider factors including the following:
          a. appropriate systems and controls should be in place to ensure that all liabilities or potential liabilities notified to the InsurerG are recorded promptly and accurately. Accordingly, the systems and controls in place should ensure that a proper record is established for each notified claim;
          b. suitable systems should be in place to identify and quantify, for the key claims handling procedures, timeliness of processing, the effects of processing backlogs and the need for any corrective action;
          c. suitable controls should be maintained to ensure that estimates for reported claims and additional estimates based on statistical evidence are appropriately made on a consistent basis and are properly categorised;
          d. regular reviews of the actual outcome of the estimates made should be carried out to check for inconsistencies and to ensure that procedures remain appropriate. The reviews should include the use of statistical techniques to compare the estimates with the eventual cost of settling the claims, after deducting the amounts already paid at the time the estimates were made;
          e. appropriate systems and procedures should be in place to ensure that claim files without activity are reviewed on a regular basis;
          f. appropriate systems and procedures should be in place to assess the validity of notified claims by reference to the underlying Contracts of InsuranceG and reinsurance treaties;
          g. suitable systems and procedures should be in place to accommodate the use of suitable experts such as loss adjusters, lawyers, actuaries, accountants etc. as and when appropriate, and to monitor their use; and
          h. there should be suitable systems and procedures in place to identify and handle large or unusual claims, including systems to ensure that senior management are involved from the outset in the processing of claims that are significant because of their size or nature.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN A2.9 Product design and pricing risk

        • PIN A2.9 Guidance

          1. The pricing of an insurance product involves the estimation of claims and costs arising from that product and the estimation of investment income arising from the investment of premium income attaching to the product. An InsurerG may be exposed to significant loss where the claims, costs or investment returns arising from the sale of a product are inaccurately calculated. This risk is particularly acute in the case of Long-Term InsuranceG , where the InsurerG does not have the option to cancel an unprofitable policy, but is also relevant to General InsuranceG .
          2. The risk management system for product design and pricing should normally include at least the following policies and procedures:
          a. minimum requirements for documentation of pricing and design decisions;
          b. clear identification of product lines that the InsurerG is prepared to engage in or has chosen not to engage in;
          c. clearly defined and appropriate levels of delegation for approval of all material aspects of product design and pricing;
          d. processes for assessing specific risks, including risks arising from:
          i. inflation;
          ii. anti-selection (the tendency of poorer risks in a population to seek insurance while better risks self-insure);
          iii. moral hazard (the tendency of insured persons to manage their own risk less effectively, in the knowledge that they are insured);
          iv. changes in mortality and morbidity patterns;
          v. technology changes;
          vi. catastrophes, natural or man-made;
          vii. legal decisions;
          viii. changes in government policy; and
          ix. investment returns;
          e. procedures for limiting risk through, for example, diversification, exclusions and reinsurance;
          f. processes to ensure that policy documentation is adequately drafted to give effect to the proposed level of coverage under the product;
          g. how emerging experience is to be reflected in price adjustments;
          h. how the Insurer'sG product pricing responds to competitive pressures; and
          i. methods for monitoring compliance with product design and pricing policies and procedures.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN A2.10 Liquidity management risk

        • PIN A2.10 Guidance

          1. An InsurerG should have access to sufficient liquidity to meet all cash outflow commitments to policyholders (and other creditors) as and when they fall due. The nature of insurance activities means that the timing and amount of cash outflows are uncertain. This uncertainty may affect the ability of an InsurerG to meet its obligations to policyholders or may require InsurersG to incur additional costs through, for example, raising additional funds at a premium on the market or through the sale of assets.
          2. The risk management system for liquidity should normally include at least the following policies and procedures:
          a. procedures to identify and control the level of mismatch between expected asset and liability cash flows under normal and stressed operating conditions (using realistic scenarios relevant to the circumstances of the InsurerG );
          b. procedures to monitor the liquidity and realisability of assets;
          c. procedures to identify and monitor commitments to meet liabilities including Insurance LiabilitiesG ;
          d. procedures to monitor the uncertainty of incidence, timing and magnitude of Insurance LiabilitiesG ;
          e. procedures to identify and monitor the level of liquid assets held by the InsurerG ; and
          f. procedures to identify and monitor other sources of funding including reinsurance, borrowing capacity, lines of credit and the availability of intra-group funding, and to identify the need for such sources to be made available.
          3. When assessing its liquidity requirements an InsurerG should also consider the currency in which the assets and liabilities are denominated, and the locations in which those assets and liabilities are situated or payable.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN A2.11 Credit quality risk

        • PIN A2.11 Guidance

          1. Credit exposures can increase the risk profile of an InsurerG and adversely affect financial viability. Credit exposure includes both on-balance sheet and off-balance sheet exposures (including guarantees, derivative financial instruments and performance related obligations) to single and RelatedG counterparties.
          2. An Insurer'sG risk management system in respect of credit quality risk will normally be expected to include at least the following policies and procedures:
          a. limits (where relevant, at both an individual and consolidated level) for credit exposures to:
          i. single counterparties and groupings of counterparties that are related to each other;
          ii. entities to which the InsurerG is RelatedG ;
          iii. single industries; and
          iv. single geographical locations;
          b. processes to monitor and control credit exposures against pre-approved limits;
          c. processes for identifying breaches of limits and for ensuring that breaches of limits are brought within the pre-approved limits within a set timeframe;
          d. processes for reducing or cancelling limits to a particular counterparty where the counterparty is known to be experiencing problems;
          e. processes for approving requests for temporary increases in limits;
          f. processes to review credit exposures (at least annually but more frequently in cases where there is evidence of a deterioration in credit quality);
          g. a management information system that is capable of aggregating exposures to any one counterparty (or group of RelatedG counterparties), asset class, industry or region in a timely manner; and
          h. a process for reporting to the Governing BodyG and senior management:
          i. significant breaches of limits; and
          ii. large exposures and other credit risk concentrations.
          3. Further guidance in respect of credit quality risk in respect of reinsurance counterparties is contained at PIN A2.14.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN A2.12 Business continuity planning risk

        • PIN A2.12 Guidance

          1. Disruptions in an Insurer'sG business can lead to unexpected losses of both a financial and non-financial nature (e.g. data, premises, reputation etc). Disruptions may occur as a result of events such as power failure, denial of access to premises or work areas, systems failure (computers, data, building equipment), fire, fraud and loss of key staff.
          2. An Insurer'sG risk management system in respect of business continuity planning risk will normally be expected to include at least the following policies and procedures:
          a. processes for identifying:
          i. events that may lead to a disruption in business continuity;
          ii. the likelihood of those events occurring;
          iii. the processes most at risk; and
          iv. the consequences of those events.
          b. a business continuity plan (BCP) describing:
          i. procedures to be followed if business continuity problems arise;
          ii. detailed procedures for enacting the BCP, including manual processes, the activation of an off-site recovery site (if needed) and the person(s) responsible for activating the BCP
          iii. a communications strategy and contact information for relevant staff, suppliers, regulators, market authorities (including exchanges), major clients, the media and other key people;
          iv. a schedule of critical systems covered by the BCP and the timeframe for restoring these systems;
          v. the pre-assigned responsibilities of staff and procedures for training staff on all aspects of the BCP; and
          vi. procedures for regular testing and review of the BCP; and
          c. procedures for backing up important data on a regular basis and storing the information off site.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN A2.13 Outsourcing risk

        • PIN A2.13 Guidance

          1. Financial firms frequently decide to outsource aspects of their operations to other parties, RelatedG or not. Outsourcing can bring significant benefits to a firm in terms of efficiency, cost reduction and risk management. However, both the process of implementing outsourcing arrangements and the outsourcing relationship itself may expose a firm to additional risk. It is therefore important that firms take care to supervise the conduct of activities that are outsourced. GEN Rule 5.3. requires an Authorised FirmG to inform the DFSAG about any material outsourcing arrangement.
          2. The activities of outsource contractors have the ability to undermine the risk management activities of InsurersG . InsurersG should take particular care if outsourcing activities such as underwriting and claims management, where inappropriate performance of the functions can expose the InsurerG to serious financial loss, for example through acceptance of inappropriate insurance risks, mis-pricing, failure to obtain appropriate reinsurance cover, or failure to detect invalid claims. These considerations apply to such arrangements as binding authorities and other agencies appointed by InsurersG .
          3. In negotiating a contract with an outsource contractor or in assessing an existing agreement, an InsurerG should give consideration to matters relevant to risk management, including the following:
          a. setting and monitoring of authority limits and referral requirements;
          b. the identification and assessment of performance targets;
          c. procedures for evaluation of performance against targets;
          d. provisions for remedial action;
          e. reporting requirements imposed on the outsource contractors (including both content and frequency of reports);
          f. the ability of the InsurerG and its risk management functions (for example, internal auditors), and its external auditors, to obtain access to the outsource contractors and their records;
          g. protection of intellectual property rights;
          h. protection of customer and firm confidentiality;
          i. the adequacy of any guarantees, indemnities or insurance cover that the outsource contractor agrees to put in place;
          j. the ability of the outsource contractor to provide continuity of business; and
          k. arrangements for change to the outsource contract or termination of the contract.
          4. InsurersG should take care to manage the risk that the sound and prudent management of the Insurer'sG business may be compromised by conflicting incentives in the outsource agreement. In particular, InsurersG should consider whether the remuneration structure creates any perverse incentives. For example, an outsource contractor with underwriting authority may have an incentive to accept poorer quality business if remuneration is based on commission (especially if bonuses are given for volume) and remuneration is not affected by the performance of the insurance contracts accepted.
          5. Intra-group outsourcing may be perceived as subject to lower risks than using outsource contractors from outside a GroupG . However it is not risk-free and an InsurerG must still assess the associated risks and make appropriate arrangements for their management.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN A2.14 Reinsurance risk

        • PIN A2.14 Guidance

          1. Management of reinsurance risk relates to the selection, monitoring, review and control of reinsurance arrangements — that is, where some part of an Insurer'sG individual or aggregate insurance risks is ceded to other InsurersG , whether by a direct InsurerG to a reinsurer or by a reinsurer to other reinsurers.
          2. An InsurerG should inform the DFSAG immediately if there is a likelihood of a problem arising with its reinsurance arrangements that is likely to materially detract from its current or future capacity to meet its obligations, and discuss with the DFSAG its plans to redress this situation. Problems that might trigger such a situation could include the insolvency of a reinsurer with a significant share in the Insurer'sG programme, discovery of exposures without current reinsurance coverage, or exhaustion of reinsurance covers through multiple losses.
          3. Each InsurerG is required (by PIN Rule 2.3.5) to maintain a written reinsurance management strategy which must be appropriate to the size and complexity of operations of the InsurerG and must define and document the Insurer'sG objectives and strategy for reinsurance management.
          4. An Insurer'sG reinsurance management strategy should, at a minimum, include the following elements:
          a. systems for the selection of reinsurance brokers and other reinsurance advisers;
          b. systems for selecting and monitoring reinsurance programmes;
          c. clearly defined managerial responsibilities and controls;
          d. clear methodologies for determining all aspects of a reinsurance programme, including:
          i. identification and management of aggregations of risk exposure;
          ii. selection of maximum probable loss factors;
          iii. selection of realistic disaster scenarios, return periods and geographical aggregation areas; and
          iv. identification and management of vertical and horizontal coverage of the reinsurance programme;
          e. selection of participants on reinsurance contracts, including consideration of diversification and credit worthiness; and
          f. systems for identifying credit exposures (actual and potential) to individual reinsurers or GroupsG of connected reinsurers on programmes that are already in place.
          5. Senior management should review an Insurer'sG reinsurance management systems on a regular basis. The review should cover:
          a. the identification and recording of policies underwritten to which reinsurance is attached;
          b. the identification of the dates when an obligation to pay reinsurance premiums arises;
          c. the identification of losses triggering recoveries under reinsurance contracts;
          d. management of the timing of payments to, and collections from, reinsurance counterparties;
          e. the credit standing and capacity of reinsurance counterparties to meet obligations to which they are subject as a result of claims incurred or to which they would become subject in the event of occurrence of losses;
          f. any concentration of reinsurance arrangements with reinsurance counterparties which would create large exposures or detract from diversification benefits in the event of occurrence of losses;
          g. the extent of reliance on reinsurance with related parties, and the accessibility of intra-group funding under a range of realistic conditions; and
          h. the impact of any adverse trends in estimated Insurance LiabilitiesG on the adequacy of the Insurer'sG reinsurance arrangements, and any implications for the capacity of the InsurerG to meet its future policyholder obligations.
          6. Procedures for assessing the credit standing of reinsurance counterparties may include the following:
          a. establishment of a security committee with a specific brief to undertake the procedures;
          b. obtaining appropriate advice from reinsurance brokers;
          c. review of ratings published by ratings agencies;
          d. monitoring of key performance indicators in reinsurers' published reports; and
          e. consideration of general conditions in the relevant reinsurance market.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN A2.15 Group risk

        • PIN A2.15 Guidance

          1. The senior management of an InsurerG remain responsible for its regulatory compliance, including in any areas that are delegated or outsourced to other GroupG members.
          2. The overall governance, high-level controls and reporting lines within the GroupG should be clear so far as they affect the InsurerG . An InsurerG should not, for example, be subject to material control or influence from other GroupG members that is exercised through informal or undocumented channels.
          3. Reliance upon functions performed at a GroupG level (for example, GroupG risk management, capital planning, liquidity and compliance) should be subject to approval and monitoring by senior management of the InsurerG .
          4. Where an InsurerG relies upon functions that are performed at a GroupG level the protocols for the performance of those functions should be clear.
          5. Senior management should establish and maintain systems and controls to identify and monitor the effect on the InsurerG of its relationship with other members of the GroupG and the activities of other members of its GroupG . These systems and controls should include procedures to monitor the following matters:
          a. changes in relationships between GroupG members;
          b. changes in the activities of GroupG members;
          c. conflicts of interest arising within the GroupG ; and
          d. events in the GroupG , particularly those that may affect the Insurer'sG own regulatory compliance (for example, failures of control or compliance in other GroupG members).
          6. The InsurerG should have in place procedures to insulate the InsurerG , so far as practicable, from potentially adverse effects of GroupG activities (for example, transfer pricing or fronting) or GroupG events that may expose the InsurerG to risk. Such procedures could include requirements for transactions with GroupG members to be at arm's length, and for maintenance of 'Chinese walls', and development of contingency plans.
          7. Senior management should take reasonable steps to ensure that:
          a. relevant GroupG members are aware of the Insurer'sG GroupG risk management and reporting obligations;
          b. GroupG capital and GroupG risk reporting requirements are complied with; and
          c. information in respect of the GroupG provided to the DFSAG is of appropriate quality.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

    • PIN App3 Calculation of Adjusted Capital Resources

      • PIN A3.1 Purpose and general provisions

        • PIN A3.1.1

          This appendix applies to all InsurersG to which PIN section 4.3 applies.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN A3.1.1 Guidance

            1. This appendix sets out the manner in which an InsurerG that is not a Protected Cell CompanyG is required to calculate its Adjusted Capital ResourcesG . The equivalent provisions for InsurersG that are Protected Cell CompaniesG are set out in PIN App5.
            2. The Adjusted Capital ResourcesG are calculated by making adjustments to the Insurer'sG equity as at the Solvency Reference DateG .

            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN A3.2 Adjusted capital resources

        • PIN A3.2.1

          An InsurerG must calculate its Adjusted Capital ResourcesG according to the formula:

          ACR = AE – HCA

          where:

          ACR means the Insurer'sG Adjusted Capital ResourcesG ;
          AE means the Insurer'sG adjusted equity; and
          HCA means the Insurer'sG hybrid capital adjustment.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A3.2.2

          Adjusted equity is calculated as set out in PIN section A3.4. The hybrid capital adjustment is set out in PIN section A3.5.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN A3.3 Base capital

        • PIN A3.3 Guidance

          The commencement point for calculating an Insurer'sG adjusted equity is the Insurer'sG base capital.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A3.3.1

          Subject to Rules PIN A3.3.2, PIN A3.3.3 and PIN A3.3.4, an Insurer'sG base capital consists of the following capital instruments and equity reserves of the InsurerG :

          (a) paid-up ordinary shares, except for shares referred to in PIN Rule A3.5.1(d);
          (b) general reserves;
          (c) in the Insurance FundG of a Takaful InsurerG , amounts provided from the Owners' EquityG by loan to the Insurance FundG and not repaid as at the Solvency Reference DateG ;
          (d) retained earnings;
          (e) current year's earnings after tax; and
          (f) hybrid capital, as defined in PIN Rule A3.5.1.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] DFSA RM50/2007 (Made 1st October 2007). [VER7/10-07]

        • PIN A3.3.2

          Where an InsurerG is not a DIFC Incorporated InsurerG , base capital may include capital instruments and equity reserves that are approved in writing by the DFSAG as equivalent to the capital instruments and equity reserves described in PIN Rule A3.3.1.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A3.3.3

          Owner's EquityG in a Takaful InsurerG other than amounts referred to in PIN Rule A3.3.1(c) must be classified as hybrid capital for the purposes of this section if:

          (a) under the constitutional documents of the InsurerG or the terms of insurance contracts or both, participation in the surpluses and losses of Takaful business is limited to the policyholders of the InsurerG ; and
          (b) the Owners' EquityG is available for loan to the Insurance FundG of the InsurerG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A3.3.4

          Hybrid capital having a term to maturity of less than five years may only be included in base capital with the written consent of the DFSAG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN A3.4 Adjusted equity

        • PIN A3.4.1

          An InsurerG must calculate its adjusted equity by adding items to and deducting them from its base capital, as set out in this section.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN A3.4.1 Guidance

            The purpose of these adjustments is to provide a consistent basis for the determination of the Insurer'sG Adjusted Capital ResourcesG and to exclude from those resources assets that may not be readily realisable for the purposes of meeting Insurance LiabilitiesG of the InsurerG .


            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A3.4.2

          The following items must be added to base capital, to the extent that the InsurerG has excluded them in determining its base capital:

          (a) any minority interests in companies that are SubsidiariesG of the InsurerG ; and
          (b) any amount in respect of dividends to be paid by the InsurerG in the form of shares.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A3.4.3

          The following items must be deducted from base capital, to the extent that the InsurerG has not excluded them in determining its base capital, or has added them to base capital under PIN Rule A3.4.2:

          (a) any amounts in respect of appropriations to be made from profit in respect of the reporting period most recently ended, including dividends, distributions by Takaful InsurersG of surplus, bonuses, pensions and welfare charges that are determined on the basis of the profit of that reporting period, whether or not the amounts have been approved by the InsurerG for payment;
          (b) Owners' EquityG in a Takaful InsurerG that does not, under the constitutional documents of the InsurerG or the terms of insurance contracts or both, participate in the surpluses and losses of Takaful business;
          (c) the amount of any investment by the InsurerG or by a SubsidiaryG of the InsurerG , in the Insurer'sG own shares;
          (d) the amount of any tax liability that would be attributable to unrealised gains on investments, if those gains were realised;
          (e) the amount of deferred acquisition costs;
          (f) the amount of any deferred tax asset;
          (g) the amount of any asset representing the value of in-force Long-Term Insurance BusinessG of the InsurerG ;
          (h) the amount of any goodwill, patents, service rights, brands and any other intangible items;
          (i) the amount of any Zakah or charity fund of a Takaful InsurerG ;
          (j) the amount of any operating assets, including inventories, plant and equipment, and vehicles; and
          (k) the amount of any other assets that may not be applied to meet Insurance LiabilitiesG of the InsurerG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007) [VER6/07-07]

        • PIN A3.4.4

          PIN Rule A3.4.3(1) does not require an InsurerG to exclude assets attributable to a Long-Term Insurance FundG maintained by the InsurerG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN A3.5 Hybrid capital adjustment

        • PIN A3.5 Guidance

          1. This section acts to limit hybrid capital to 15% of an Insurer'sG adjusted equity.
          2. The purpose of the hybrid capital adjustment is to limit the extent to which an InsurerG may rely for its Adjusted Capital ResourcesG on instruments that do not or may not constitute permanent capital of the InsurerG . Such instruments include share capital contributed by a Holding CompanyG , where the Holding Company'sG investment is financed by debt rather than by its own capital.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A3.5.1

          Hybrid capital includes the following items:

          (a) subordinated debt;
          (b) preference shares;
          (c) Owners' EquityG in a Takaful InsurerG , of the type described in PIN Rule A3.3.3; and
          (d) ordinary shares issued by an InsurerG to a Holding CompanyG whose own paid-up ordinary share capital, taken together with its general reserves, is lower than that of the InsurerG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A3.5.2

          Subject to PIN Rule A3.5.3, an InsurerG must calculate its hybrid capital adjustment as the amount by which the total amount of hybrid capital exceeds 15% of adjusted equity.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A3.5.3

          The DFSAG may at its discretion and on the application of an InsurerG , permit that InsurerG to apply PIN Rule A3.5.2 as though the figure of 15% was replaced with a higher figure approved in writing by the DFSAG . The approved figure may not be more than the actual percentage which the hybrid capital represents of adjusted equity, and may not in any case exceed 30%.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

    • PIN App4 Calculation of Minimum Capital Requirement

      • PIN A4.1 Purpose and general provisions

        • PIN A4.1.1

          This appendix applies to all InsurersG to which PIN section 4.3 applies.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN A4.1.1 Guidance

            1. This appendix sets out the manner in which an InsurerG that is not a Protected Cell CompanyG is required to calculate its Minimum Capital RequirementG . The equivalent provisions for InsurersG that are Protected Cell CompaniesG are set out in PIN App6.
            2. The Minimum Capital RequirementG is calculated by determining individual components in respect of various specific risks that the InsurerG is exposed to, and adding those components together to arrive at the Minimum Capital RequirementG .

            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN A4.2 Minimum capital requirement

        • PIN A4.2.1

          Subject to PIN Rule A4.2.2, an InsurerG must calculate its Minimum Capital RequirementG according to the formula:

          MCR = DRC + IVRC + OARC + OLRC + CRC + SFAC + URC + RRC + LIRC + AMRC

          Where the following definitions apply:

          Term Definition
          MCR Insurer'sG Minimum Capital RequirementG ;
          DRC Insurer'sG default risk component;
          IVRC Insurer'sG investment volatility risk component;
          OARC Insurer'sG off-balance sheet asset risk component;
          OLRC Insurer'sG off-balance sheet liability risk component;
          CRC Insurer'sG concentration risk component;
          SFAC Insurer'sG size factor adjustment component;
          URC Insurer'sG underwriting risk component;
          RRC Insurer'sG reserving risk component;
          LIRC Insurer'sG Long-Term InsuranceG risk component; and
          AMRC Insurer'sG asset management risk component.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.2.2

          The methods of calculation of the components referred to in PIN Rule A4.2.1 are set out in sections PIN A4.4, PIN A4.5, PIN A4.6, PIN A4.7, PIN A4.8, PIN A4.9, PIN A4.10, PIN A4.11, PIN A4.12 and PIN A4.13.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.2.3

          An Insurer'sG Minimum Capital RequirementG must always be equal to or higher than:

          (a) in the case of a Class 1 Captive InsurerG , $ 150,000;
          (b) in the case of a Class 2 Captive InsurerG , $ 250,000;
          (c) in the case of a Class 3 Captive InsurerG , $ 1,000,000; and
          (d) in the case of all other InsurersG , $ 10,000,000.
          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007) [VER6/07-07]

      • PIN A4.3 Applicability of components to assets of the insurer

        • PIN A4.3.1

          Subject to PIN Rule A4.3.2, an InsurerG must calculate those components of its Minimum Capital RequirementG that are relevant to assets, in respect of every asset that is owned by the InsurerG and that is available to meet the liabilities of the InsurerG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.3.2

          Where an InsurerG arranges its affairs such that its Invested AssetsG are held in a related entity, the InsurerG may, with the written approval of the DFSAG , calculate components of its Minimum Capital RequirementG by reference to the Insurer'sG interest in the assets that are held by the related entity, instead of by reference to the interest that the InsurerG has in that related entity. In that case this appendix shall be interpreted as though the assets (representing the Insurer'sG interest) held by the related entity were held directly by the InsurerG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • PIN A4.3.2 Guidance

            The effect of PIN Rule A4.3.2 is to provide flexibility for InsurersG whose investments are managed on a pooled basis within a GroupG , or which establish specialist SubsidiariesG to manage their investments. While the Insurer'sG asset in such cases is a balance with, or investment in, a related entity, this rule permits the InsurerG to 'look through' the corporate arrangement and apply this appendix to the assets of the related entity as though they were the Insurer'sG own.


            Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN A4.4 Default risk component

        • PIN A4.4 Guidance

          The purpose of the default risk component is to require an InsurerG to set aside capital to cover the risk that amounts receivable from counterparties will not be received. The basic calculation model for this component, set out in PIN A4.4.1, is modified by additional provisions that permit an InsurerG to take account of the reduced default risk where an asset is covered by guarantees or collateral, and impose additional capital charges on assets that are encumbered. In addition, certain assets that are left out of account in calculating an Insurer'sG Adjusted Capital ResourcesG are exempt from the default risk component calculation. Excluding these assets from Adjusted Capital ResourcesG already effectively imposes a 100% capital requirement.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.4.1

          An InsurerG must calculate its default risk component as the sum of the amounts obtained by multiplying the value of each asset of the InsurerG with the percentage applicable to that asset, as set out in the tables contained in this RuleG and subject to the provisions of Rules PIN A4.4.2, PIN A4.4.5, PIN A4.4.6 and PIN A4.4.7.

          (a) Assets that are Invested AssetsG

          Asset %
          (a) Bonds RatedG 'AAA', issued by a Government or Government agency 0.0
          (b) Bonds not included in (a), RatedG 'A' or better 0.4
          (c) Bonds RatedG 'BBB' 3.3
          (d) Bonds RatedG 'BB' 7.5
          (e) Bonds RatedG 'B' 13.7
          (f) Bonds RatedG 'CCC' 20.2
          (g) Other RatedG bonds 30.0
          (h) Secured loans — performing 2.0
          (i) Secured loans — Non-PerformingG 14.0
          (j) Loans to directors of the InsurerG or to directors of RelatedG parties, or to the dependent relatives of such directors 100.0
          (k) Unsecured loans to employees (except loans of less than $1,000) 100.0
          (l) Other bonds and loans 50.0
          (b) Assets that are not Invested AssetsG

          Asset %
          (a) Reinsurance recoverable from:  
            i. reinsurers RatedG 'AAA' 0.5
          ii. reinsurers RatedG 'AA' 1.2
          iii. reinsurers RatedG 'A' 1.9
          iv. reinsurers RatedG 'BBB' 4.7
          v. reinsurers RatedG 'BB' 9.6
          vi. reinsurers RatedG 'B' 23.8
          vii. reinsurers RatedG 'CCC' 49.7
          viii. reinsurers RatedG 'R' 50.0
          ix. other reinsurers 25.0
          (b) Other assets 3.0

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.4.2

          Reinsurance recoverable includes amounts recoverable in respect of outstanding claims and in respect of Premium LiabilitiesG . InsurersG may make reasonable approximations where it is not possible to identify exactly the reinsurers to which amounts recoverable relate (for example, in the case of recoveries in respect of Premium LiabilitiesG and in respect of claims incurred but not reported).


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.4.3

          Where an asset falls within more than one category in the table in Rules PIN A4.4.1(a) or PIN A4.4.1(b), the highest of the percentages applicable to that asset must be applied.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.4.4

          Where an asset has been explicitly, unconditionally and irrevocably guaranteed for its remaining term, by a guarantor with a rating of 'A' or better who is not RelatedG to the InsurerG , the InsurerG may at its option use, in place of the relevant percentage in the table in Rules PIN A4.4.1(a) or PIN A4.4.1(b), the percentage in those tables that would apply to a debt due from the guarantor.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.4.5

          Where an InsurerG holds collateral against an asset, and the collateral consists of a charge, mortgage or other security interest in cash or in debt securities whose issuer has a rating of 'A' or above, the InsurerG may at its option use, in place of the relevant percentage in the table PIN A4.4.1(a) or in PIN Rule A4.4.1(b), the percentage in those tables that would apply to the collateral.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.4.6

          The provisions of Rules PIN A4.4.4 and PIN A4.4.5 apply only to so much of the asset that is covered by the guarantee or the collateral.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.4.7

          Notwithstanding anything else in this section:

          (a) the amount included in the default risk component in respect of any asset that is subject to a fixed or floating charge, mortgage or other encumbrance must be 100% of the value of the asset to the extent of that charge, mortgage or encumbrance. In the case of such assets, the percentages set out in the tables above must be applied only to the amount, if any, by which the value of the asset exceeds the amount of the charge, mortgage or encumbrance; and
          (b) no amount must be included in the default risk component in respect of assets excluded from Adjusted Capital ResourcesG in accordance with Rules PIN A3.4.3(e), PIN A3.4.3(f), PIN A3.4.3(g), PIN A3.4.3(h), PIN A3.4.3(k) or PIN A3.4.3(l).

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN A4.5 Investment volatility risk component

        • PIN A4.5 Guidance

          The purpose of the investment volatility risk component is to require an InsurerG to set aside capital to cover the risk of deterioration in the values of Invested AssetsG . Invested AssetsG that are linked to liabilities of Investment-Linked InsuranceG contracts are exempted from the calculation, since there is a direct correlation between the values of the assets and the values of the liabilities to which they are linked.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.5.1

          Subject to PIN Rule A4.5.2, an InsurerG must calculate its investment volatility risk component as the sum of the amounts obtained by multiplying the value of each Invested AssetG with the relevant percentage applicable to that asset as set out in the following table.

          Asset %
          (a) All bonds up to 1 year to maturity 1.0
          (b) Bonds between 1 and 2 years to maturity 2.0
          (c) Bonds between 2 and 5 years to maturity 4.0
          (d) Bonds between 5 and 10 years to maturity 6.0
          (e) All other bonds 8.0
          (f) Equity investments* 15.0
          (g) Preference shares 6.0
          (h) Land and buildings 18.0
          *Note: Item (f) includes equity shares, participations in collective investment schemes (whether or not the underlying investments are themselves equity investments), participations in joint ventures, and certificates of Mudaraba and Musharaka.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.5.2

          No amount must be included in the calculation of the investment volatility risk component in respect of:

          (a) investments that are linked to liabilities of Investment-Linked InsuranceG contracts; or
          (b) assets referred to in PIN Rule A4.4.7(b).

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN A4.6 Off-balance sheet asset risk component

        • PIN A4.6 Guidance

          The purpose of the off-balance sheet asset risk component is to require an InsurerG to set aside capital to cover the risk of default and deterioration in value in respect of exposures that the InsurerG has because it is a party to a derivative contract.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.6.1

          An InsurerG is required to calculate an off-balance sheet asset risk component, if the InsurerG is, as at the Solvency Reference DateG , a party to a derivative contract, including a forward, future, swap, option or other similar contract, but not including:

          (a) a put option serving as a guarantee;
          (b) a foreign exchange contract having an original maturity of 14 days or less; or
          (c) an instrument traded on a futures or options exchange, which is subject to daily mark-to-market and margin payments.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.6.2

          An InsurerG must calculate its off-balance sheet asset risk component as the sum of the amounts obtained by applying the calculations set out in PIN Rule A4.6.3 in respect of each derivative contract entered into by the InsurerG that meets the description in PIN Rule A4.6.1.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.6.3

          The amount in respect of a derivative contract is obtained by calculating, for an asset equivalent amount as determined in PIN Rule A4.6.4, a default risk component as set out in PIN section A4.4 and an investment volatility risk component as set out in PIN section A4.5, as though the asset equivalent amount were a debt obligation due from the derivative counterparty.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.6.4

          The asset equivalent amount in respect of a derivative is calculated as the sum of the current mark-to-market exposure of the derivative (where this is positive) and the amount obtained by multiplying the notional principal amount of the derivative by the factors specified in the following table, according to the nature and residual maturity of the derivative.

          Residual maturity A B C D E
          (a) Less than 1 year NIL 1.0% 6.0% 7.0% 10.0%
          (b) 1 year or more, but less than 5 years 0.5% 5.0% 8.0% 7.0% 12.0%
          (c) 5 years or more 1.5% 7.0% 10.0% 8.0% 15.0%

          Where:

          A means interest rate contracts;
          B means foreign exchange and gold contracts;
          C means equity contracts;
          D means precious metal contracts (other than gold); and
          E means other contracts.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN A4.7 Off-balance sheet liability risk component

        • PIN A4.7 Guidance

          1. The purpose of the off-balance sheet liability risk component is to require an InsurerG to set aside capital to cover the risk that it will be required to perform on a guarantee, letter of credit or other credit substitute that it has entered into. Although such items are not liabilities of the InsurerG as at the Solvency Reference DateG , they have the capacity to crystallise as liabilities at a subsequent date and therefore to affect the Insurer'sG capital position.
          2. Credit substitutes that are Contracts of InsuranceG are excluded from the calculation of this component, as they are subject to a separate capital requirement under PIN section 4.5.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.7.1

          An InsurerG must calculate an off-balance sheet liability risk component if the InsurerG has issued guarantees, including put options serving as guarantees, letters of credit or any other credit substitute (other than an insurance contract) in favour of another party, so that the InsurerG is exposed to the risk of having to make payment on those instruments should the guaranteed party default.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.7.2

          An InsurerG must calculate its off-balance sheet liability risk component as the sum of the amounts obtained by applying the calculations set out in PIN Rule A4.7.3 in respect of each guarantee, letter of credit or other credit substitute.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.7.3

          The amount in respect of a guarantee, letter of credit or other credit substitute (other than an insurance contract) is obtained by calculating, for the nominal amount of the guarantee, letter of credit or other credit substitute, a default risk component as set out in PIN section A4.4 and an investment volatility risk component as set out in PIN section A4.5, in respect of the obligation or asset over which the guarantee, letter of credit or other credit substitute is written, as though that obligation or asset were an obligation or asset of the InsurerG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN A4.8 Concentration risk component

        • PIN A4.8 Guidance

          The purpose of the concentration risk component is to require an InsurerG to set aside capital to cover the sensitivity that it has to default or volatility in respect of assets and exposures to single counterparties or groupings of connected counterparties, or single properties. The additional capital requirement applies to investment exposures, including off-balance sheet exposures, and amounts outstanding under finite risk reinsurance contracts in respect of Long-Term InsuranceG . It is calculated on the basis of the Insurer'sG total exposure to the counterparty, grouping of connected counterparties or property, and operates on a sliding scale depending on the size of that exposure relative to the Insurer'sG Adjusted Capital ResourcesG . The total amount of the concentration risk component in respect of any asset is limited to 100% of the value of the asset, and certain assets that are left out of account in calculating an Insurer'sG Adjusted Capital ResourcesG are excluded from the calculation.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.8.1

          An InsurerG must calculate a concentration risk component if the InsurerG has, as at the Solvency Reference DateG , an investment exposure to a single counterparty or (taken in the aggregate) to a grouping of two or more counterparties who are RelatedG to each other, or to a single property, that exceeds 10% of the Insurer'sG Adjusted Capital ResourcesG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.8.2

          For the purposes of the calculation referred to in PIN Rule A4.8.1:

          (a) 'investment exposure' means the aggregate value of all equity, bond or other investments in or in respect of the counterparty or grouping of RelatedG counterparties or property in question, together with off-balance sheet exposures to the same counterparty or grouping of RelatedG counterparties or property that the InsurerG has because it has issued guarantees, letters of credit or other credit substitutes (other than insurance contracts), or because it has entered into derivative contracts, and any amounts referred to in PIN Rule A4.12.6 in respect of that counterparty or grouping of RelatedG counterparties, but excluding any assets excluded from base capital by reason of any of the RulesG referred to in PIN Rule A4.4.7(2); and
          (b) 'AAA'-RatedG Governments and Government agencies are not counterparties.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.8.3

          An InsurerG must calculate its concentration risk component as the sum of the amounts obtained by applying to each investment exposure that exceeds 10% of the Insurer'sG Adjusted Capital ResourcesG the relevant formula set out in the following table, subject to PIN Rule A4.8.4.

          Exposure expressed as a percentage of adjusted capital resources Formula to determine concentration risk component
          (a) Over 10 up to 25 20% of the amount by which the investment exposure exceeds 10% of Adjusted Capital ResourcesG , up to a limit equivalent to 3% of Adjusted Capital ResourcesG .
          (b) Over 25 up to 50 3% of the amount of Adjusted Capital ResourcesG , plus 40% of the amount by which the investment exposure exceeds 25% of Adjusted Capital ResourcesG , up to a limit in total equivalent to 13% of Adjusted Capital ResourcesG .
          (c) Over 50 up to 75 13% of the amount of Adjusted Capital ResourcesG , plus 60% of the amount by which the investment exposure exceeds 50% of Adjusted Capital ResourcesG , up to a limit in total equivalent to 28% of Adjusted Capital ResourcesG .
          (d) Over 75 up to 100 28% of the amount of Adjusted Capital ResourcesG , plus 80% of the amount by which the investment exposure exceeds 75% of Adjusted Capital ResourcesG , up to a limit in total equivalent to 48% of Adjusted Capital ResourcesG .
          (e) Over 100 48% of the amount of Adjusted Capital ResourcesG , plus 100% of the amount by which the investment exposure exceeds 100% of Adjusted Capital ResourcesG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.8.4

          If the amount included in the concentration risk component in respect of an investment exposure, aggregated with the sum of the amounts included in the default risk component, investment volatility risk component and off-balance sheet asset risk component in respect of the assets and off-balance sheet exposures comprising that investment exposure, exceeds 100% of that investment exposure, the concentration risk component in respect of that investment exposure must be reduced so that the total of the four components in respect of that investment exposure is equal to 100% of that investment exposure.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN A4.9 Size factor component

        • PIN A4.9 Guidance

          The effect of the size factor component is to provide a relatively higher capital requirement in respect of InsurersG with smaller portfolios of Invested AssetsG . The calculation adjusts the aggregate of the default risk component, investment volatility risk component and concentration risk component in respect of Invested AssetsG , by a factor that varies according to the total size of Invested AssetsG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.9.1

          The base figure for the size factor component is determined by aggregating the following components:

          (a) the default risk component determined in accordance with PIN section A4.4, so far only as concerns the Insurer'sG Invested AssetsG ;
          (b) the investment volatility risk component determined in accordance with PIN section A4.5; and
          (c) the concentration risk component determined in accordance with PIN section A4.8, so far only as concerns the Insurer'sG Invested AssetsG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.9.2

          An InsurerG must calculate its size factor component by multiplying the base figure determined in accordance with PIN Rule A4.9.1 by the factor derived by applying the following formula, where x represents the total Invested AssetsG expressed in millions of dollars:

          (a) If x ≤ 100, the factor is 1.5.
          (b) If 100 < x ≤ 200, the factor is (150 + 0.5(x-100))/x.
          (c) If 200 < x ≤ 1,200, the factor is (200 - 0.2(x-200))/x.
          (d) If x > 1,200, the factor is zero.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

      • PIN A4.10 Underwriting risk component

        • PIN A4.10 Guidance

          The purpose of the underwriting risk component of the Minimum Capital RequirementG is to require an InsurerG to set aside capital to address the risk that the cost of claims in respect of General Insurance BusinessG will vary from the cost implicit in the premiums being charged. The basic calculation model set out in PIN Rule A4.10.2 applies different factors to the premium in respect of different Classes of BusinessG , based on the different perceived risk of variability associated with each. The model is modified by additional provisions dealing with certain Classes of BusinessG . This section also restricts the extent to which reinsurance may be taken into account when calculating the underwriting risk component.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.10.1

          Subject to the other provisions of this section, an InsurerG must calculate its underwriting risk component as the sum of the amounts obtained by multiplying the Insurer'sG base premium, for each Class of BusinessG , by the percentage factors set out in the following table.

          Class of Business Percentage factor
            Direct insurance Proportional reinsurance Non-proportional and facultative reinsurance
          (a) ClassesG 1 and 2 18 18 27
          (b) ClassG 3 12 12 18
          (c) ClassG 4 17 17 26
          (d) ClassG 5 19 19 30
          (e) ClassG 6 27 27 29
          (f) ClassesG 7(a) and 7(b) 90 90 140
          (g) ClassG 8 18 18 27

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007) [VER6/07-07]

        • PIN A4.10.2

          Where an InsurerG underwrites Contracts of InsuranceG in ClassG 1 or ClassG 2, and those contracts constitute Long-Term InsuranceG contracts, the InsurerG must not calculate an underwriting risk component in respect of those contracts but must instead calculate a Long-Term InsuranceG risk component as set out in PIN section A4.12.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.10.3

          The DFSAG may, on written application by an InsurerG undertaking business in ClassG 2, give consent in writing to the use of percentages other than those stated in item PIN Rule A4.10.1(a), if the DFSAG is satisfied that adequate mortality and morbidity information exists in respect of that business, to provide a reasonable basis for reliance on actuarial principles. The percentages that may be used must be those stated in the notice giving consent, but may not be lower than 12% in the case of direct insurance and proportional reinsurance, and 18% in the case of non-proportional or facultative reinsurance.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.10.4

          Where the Insurer'sG estimated net retention as at the Solvency Reference DateG in respect of a property catastrophe exceeds the sum of the amounts calculated in accordance with PIN Rule A4.10.1 in respect of ClassG 5, before taking account of this RuleG , the sum of those amounts must be replaced by the Insurer'sG estimated net retention in respect of a property catastrophe when calculating the underwriting risk component.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.10.5

          For the purposes of PIN Rule A4.10.4, the Insurer'sG net retention means the sum of claims expected to be paid, associated direct and indirect settlement costs and reinstatement premiums expected to be paid in respect of reinsurance recoveries resulting from those claims, less the sum of reinstatement premiums expected to be received and reinsurance and other recoveries expected to be received resulting from those claims, in the event of a property catastrophe representing a return period of not less than 100 years.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.10.6

          For the purposes of this section, and subject to PIN Rule A4.10.8, the Insurer'sG base premium means the higher of the two following amounts:

          (a) the amount of the Insurer'sG Net Written PremiumG during the reference period; and
          (b) 50% of the amount of the Insurer'sG Gross Written PremiumG during the reference period.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.10.7

          In PIN Rule A4.10.6, the reference period means the reporting period ending next before the Solvency Reference DateG , except where the Insurer'sG forecast Net Written PremiumG , according to its business plan, for the reporting period next after that reporting period, is higher, in which case the reference period will be the second of the two reporting periods and the Net Written PremiumG and Gross Written PremiumG used for the purposes of PIN Rule A4.10.6 must be the forecast Net Written PremiumG and Gross Written PremiumG for that second reporting period.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.10.8

          Where an InsurerG enters, as InsurerG or cedant, into a General InsuranceG contract of longer than twelve months' duration, the premium or reinsurance premium on that contract must not be included fully in the calculation of base premium in the reporting period in which the contract was effected, but must be apportioned over the duration of the contract by allocating to each reporting period a fraction of the premium proportionate to the fraction of the contract period that falls into that reporting period, or on a different basis approved in writing by the DFSAG .


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.10.9

          Where an InsurerG enters as reinsurer into a finite risk reinsurance contract in respect of General Insurance BusinessG , the underwriting risk component in respect of that contract, regardless of the Class of BusinessG it relates to, must be 4% of the base premium on the contract.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • The content selected is no longer in force and cannot be presented in Whole Section view.

      • PIN A4.11 Reserving risk component

        • PIN A4.11 Guidance

          The purpose of the reserving risk component of the Minimum Capital RequirementG is to require an InsurerG to set aside capital to address the risk that the cost of claims in respect of General Insurance BusinessG will vary from the amounts recorded as liabilities in the Insurer'sG balance sheet. This calculation applies only to liabilities in respect of outstanding claims (the risk of deterioration in Premium LiabilityG is addressed in the underwriting risk component in PIN section A4.10). The principles of the calculation are similar to those in PIN section A4.10.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.11.1

          Subject to the other provisions of this section, an InsurerG must calculate its reserving risk component as the sum of the amounts obtained by multiplying the Insurer'sG base claims reserve under Contracts of InsuranceG and reinsurance effected by it, for each Class of BusinessG , by the percentage factors set out in the following table.

          Class of Business Percentage factor
            Direct insurance Proportional reinsurance Non-proportional and facultative reinsurance
          (a) ClassesG 1 and 2 28 28 28
          (b) ClassG 3 12 12 12
          (c) ClassG 4 16 16 16
          (d) ClassG 5 22 22 22
          (e) ClassG 6 10 10 10
          (f) ClassesG 7(a) and 7(b) 31.25 31.25 31.25
          (g) ClassG 8 28 28 28
          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007) [VER6/07-07]

        • PIN A4.11.2

          Where an InsurerG underwrites Contracts of InsuranceG in ClassG 1 or ClassG 2, and those contracts constitute Long-Term InsuranceG contracts, the InsurerG must not calculate a reserving risk component in respect of those contracts but must instead calculate a Long-Term InsuranceG risk component as set out in PIN section A4.12.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.11.3

          The DFSAG may, on written application by an InsurerG undertaking Insurance BusinessG in ClassG 2, give consent in writing to the use of percentages other than those stated in PIN Rule A4.11.1(a), if the DFSAG is satisfied that adequate mortality and morbidity information exists in respect of that business, to provide a reasonable basis for reliance on actuarial principles. The percentages that may be used must be those stated in the notice giving consent, but may not be lower than 5%.


          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.11.4

          For the purposes of PIN Rule A4.11.1, the Insurer'sG base claims reserve means the higher of the following two amounts:

          (a) the amount of the Insurer'sG provision for Gross Outstanding ClaimsG , less the amount of reinsurance and other recoveries expected to be received in respect of that liability; and
          (b) 50% of the amount of the Insurer'sG provision for Gross Outstanding ClaimsG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

        • PIN A4.11.5

          Where an InsurerG has entered as reinsurer into a finite risk reinsurance contract, the reserving risk component in respect of that contract, regardless of the class of business it relates to, must be 6% of the base claims reserve on the contract.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]

          • The content selected is no longer in force and cannot be presented in Whole Section view.

      • PIN A4.12 Long-term insurance risk component

        • PIN A4.12 Guidance

          1. The purpose of the Long-Term InsuranceG risk component of the Minimum Capital RequirementG is to require an InsurerG to set aside capital to address the risk that the net present value of future Policy BenefitsG will vary from the amounts recorded as Long-Term Insurance LiabilitiesG in the Insurer'sG balance sheet.
          2. The calculation model set out in PIN Rule A4.12.1 deals separately with Direct Long-Term Insurance BusinessG , with proportional and non-proportional reinsurance of Long-Term Insurance BusinessG , and with finite risk reinsurance of Long-Term Insurance BusinessG .
          3. To determine the amount for proportional reinsurance business, the calculation model applies ratios to the Insurer'sG premium, to its liability and to the capital at risk in respect of such business. To determine the amount for non-proportional reinsurance, a ratio is applied to the Insurer'sG non-proportional reinsurance premium. To determine the amount for finite risk reinsurance, ratios are applied to the balance outstanding on contracts, depending on the rating of the InsurerG and the term to completion. To determine the amount for Direct Long-Term Insurance BusinessG , the calculation model applies ratios to the Insurer'G s liability and to its capital at risk in respect of such business. Additional or alternative charges are made in respect of particular Classes of BusinessG .

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007) [VER6/07-07]
          [Amended] DFSA RM56/2008 (Made 1st July 2008). [VER10/07-08]

        • PIN A4.12.1

          An InsurerG must calculate its Long-Term InsuranceG risk component as the sum of the proportional reinsurance element determined in accordance with PIN Rule A4.12.3, the non-proportional reinsurance element determined in accordance with PIN Rule A4.12.4, the finite risk reinsurance element determined in accordance with PIN Rule A4.12.5 and the Direct Long-Term InsuranceG element determined in accordance with PIN Rule A4.12.8.

          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007) [VER6/07-07]

        • PIN A4.12.2

          In Rules PIN A4.12.3, PIN A4.12.4 and PIN A4.12.8:

          (a) contracts of finite risk reinsurance must be excluded from the calculation of the proportional reinsurance element and the non-proportional reinsurance element;
          (b) 'provisions in respect of Long-Term InsuranceG Business' means the amount of Long-Term Insurance LiabilityG in respect of the contracts concerned, except that the amount may not be less than 85% of the liability determined without taking reinsurance into account; and
          (c) 'capital at risk' means the aggregate amount of sums assured on contracts of Long-Term InsuranceG issued by an InsurerG , minus the aggregate amount of provisions in respect of those contracts. Where the contract is an annuity, the sum assured must be taken to be the present value of the annuity payments. The capital at risk must be determined separately for each contract, and where the capital at risk calculated for a contract is less than zero, the capital at risk for that contract must be taken as zero.
          Derived from DFSA RM06/2004 (Made 16th September 2004). [VER1/09-04]
          [Amended] RM46/2007 (Made 5th July 2007) [VER6/07-07]

        • PIN A4.12.3

          The proportional reinsurance element is calculated as the sum of the following six amounts, so far only as they relate to proportional reinsurance business of the InsurerG :

          (a) 2% of the amount of the Insurer'sG Net Written PremiumG ;
          (b) 3% of the amount of provisions in respect of Long-Term Insurance BusinessG that is annuity and pensions business and is not Investment-Linked InsuranceG ;
          (c) 1.25% of the amount of provisions in respect of Long-Term Insurance BusinessG that is Investment-Linked InsuranceG , where the contracts are subject to a capital guarantee;
          (d) 0.5% of the amount of provisions in respect of Long-Term Insurance BusinessG that is Investment-Linked InsuranceG , where the contracts are not subject to a capital guarantee;
          (e) 0.5% of the amount of provisions in respect of Long-Term Insurance BusinessG other than business described in RulesG (b), (c), and (d