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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 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]