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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 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]