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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 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]