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Dubai Financial Services Authority (DFSA): Contents

Dubai Financial Services Authority (DFSA)
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Prudential — Insurance Business Module (PIN) [VER15/01-18]
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  • 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]