Home   Browse contents   View updates   Search  
     Quick search
Go
   

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

BackText onlyPrint

You need the Flash plugin.

Download Macromedia Flash Player



  • 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.